Discuss About The Fundamentals Of Corporate Finance Hoboken.
The Wesfarmers limited is a fir which is having a very good reputation in the market and also it has its stock listed in the Australian stock exchange market. According to the management of the Wesfarmers limited, audit planning is conducted to find the expected losses and profits. The nature and size of the business will also be affecting the time required for the completion of the audit. Also if the business will have a big reach and diverse approach then it will be time-consuming for the firm to formulate strategies and also the audit process will consume more time (Wesfarmers, 2017). Therefore this process can also be termed as the systematic approach of the area control in which the internal and financial processes of a firm are reviewed in accordance with the engagement. Audit engagement and audit planning must not be viewed separately and thus a discrete decision should also not be made according to the ISA 300. They should be taken into consideration together and thus they may be helpful in making error corrections and control deficiencies.
The principles of the corporate governance that should be followed by the Wesfarmers limited workforce are as follows:
The board of the firm Wesfarmers limited consists of independent and trustworthy directors. They also check that the directors have no personal profit in relation to the firm’s enhancement. They also keep an eye on almost every job function of every level so as to ascertain that there are no future problems that may be faced by the firm.
The firm asks the board of directors to make unbiased decisions and also to ensure the firm’s safety from time to time. Also, there is a nomination committee that appoints the non-executive directors with the help and recommendations of the top structure of the firm. Thus the nomination committee makes it easier for the stakeholder to believe the firm’s overview, and thus make them tension free to invest in the finances of the firm (Deegan, 2011). The main objective decided by the Wesfarmers limited is to have an honest and ethical conduct which will help to improve the quality of the firm and thus also work with the compliance of the ASX governance principles.
The top management structure of the company should have the proper knowledge relating to the social, economic and political situations which affect the environment of the firm. Also, the directors must be up to date with the knowledge of the concerned field and thus have enhanced professionalism in the digital scenarios of the firm (Parrino et. al, 2012). The directors should also recognize any kind of gap or fault present in the working environment of the firm and thus use his knowledge to mold it. The directors should also look that they are working in accordance with the statutory concerns of the firm so that the process of risk management can also be carried out in a more elaborated manner. Thus the company Wesfarmers limited have introduced such systems of work and management to make its organization more successful by acting in governance to the corporate governance principles.
The risk management system of the company Wesfarmers limited tells us about the controls of the risk management system and the principles which have been taken into consideration for carrying out the job of reporting and analyzing (Needles & Powers, 2013). There has also been an introduction of the risk management system between the audit committee, managing directors, finance directors and the board to check the uncertainties. This framework was introduced to the company in May 2016 and it was quite helpful for the company to manage its treasures and also see that the financial risk movements of the interests and foreign currencies are observed correctly.
The operating framework of the company Wesfarmers limited tells us about its reports, activities, divisional structure and helps in assisting the business. It also helps to promote corporate identity and culture and also have a very applicable management system which has been designed specifically for the divestments and the acquisitions.
A code of conduct has been set up by the company so that it can ensure that the firm is functioning according to the management framework and all the corporate governance principles are applied so as to have a healthy and responsible environment for the firm. Wesfarmers have looked after its company by maintaining and applying all the necessary corporate governance principles wherever required. Also, the ethical values have been made known to the lower level employees, consultants, directors and the contractors so as to ascertain the design made by the company will help the people to get motivated and act morally to their superiors.
The Wesfarmers limited firm ensures the safety by preparing a SWOT analysis of the preparation and the performance of situation planning. it also uses its program of transferring to reinsurers and external insurers so that it can meet its formal corporate planning structure and thus have necessity divisions which will help them to mould the company by identification of the changes or risk present in the industry. The committee of the risk management also helps the company to find various loopholes or vulnerabilities in the management system of the firm and thus also suggest them with some quick measures. The audit and the internal control team plays an important role in verifying all the transactions of the firm and thus ascertaining that there are no internal disputes within the accounts (Wesfarmers, 2017). These reports are also given provided to the stakeholders so that they can be kept informed about the company’s performance and all the risks faced by it and then invest in the company’s portfolio.
Wesfarmers limited has appointed two company secretaries who are assigned with the task of assessment of the overall functioning of the firm. Also, the board has been asked to make a time to time disclosure of the reporting framework so that the information can be used for the betterment of the firm’s performance in future (Wesfarmers, 2017). The company has also decided to make a committee of four board members who will help to facilitate the proper advisory matters. This committee plays a vital role in the enhancement of the company’s framework by giving them suggestions and other necessary information. The auditors have also been asked to provide a much more balanced and elaborated report on the assessment of the risk factors. Both the internal and the external auditors play an important role for the firm by providing it with the key financial statement and also the timely disclosure of the reports (Peirson et. al, 2015).
The company was given the status of gold tier employer in relation to the remuneration operations. Also, the company follows gender equality which helps them to distribute the tasks and responsibility equally among the employees. There has been a committee of people performance which helps the firm to take decisions regarding the remunerations. Also, there will be no gap present between the males and females of the company which will help to prevent the company from any type of misbehaving (Wesfarmers, 2017).
Based on the ASX principles, Wesfarmers have been giving all the necessary information to its stakeholders. This information will be helpful for the holders to analyze the firm’s performance and then act in its accordance. Also, the company takes several other measures which are helpful for the shareholders (Petersen & Plenborg, 2012)
Wesfarmers limited have been facing different types of risk from time to time. So, in order to manage its framework and the system, it has kept it strategy concerns in the particular area. It has the main focus on the establishment of the moral values for its customers and subordinates. Further, it even has an emphasis on the capital management so that it can have the high credit rating (Kaplan, 2011). Moreover, it keeps its main focus on the areas that are most likely to be affected by the risk of competitors.
ASA570 have the main focus on the evaluation process of the auditors and also how these processes help the firm to gain expertise and advantage in the field. The auditors are required to make proper analytical reports. The major processes used by them are the evaluation of various ratios in comparison to the ratios of the past year. This helps in knowing where the difference arises (Fazal, 2013). Secondly, the regression analysis can be used. Thirdly, the account balances that pertain to the figures of unadjusted account balances must be compared with that of the statement of trial balances. Lastly, the ratios must be computed, as well as compared. The auditor can use the financial statement together with the computed ratio to find the deviation so the manner in which the business is performing. When it comes to the point of view of the auditor, the auditor strikes the notion of various ratios especially the balance sheet ratios as it helps in providing a formidable answer to the business performance (Elder et. al, 2010). Hence, going by the financial statements and ratio, a clear cut answer can be famed and decision can be taken.
|
2013 |
2014 |
2015 |
2016 |
2017 |
|
|
GP ratio = |
33.32941 |
30.83666 |
30.68661 |
30.50891 |
31.84004 |
|
NP ratio= |
3.804988 |
4.489673 |
3.92902 |
0.62126 |
4.224068 |
|
Current ratio = |
1.105934 |
1.131486 |
0.934917 |
0.92901 |
0.024863 |
|
Quick ratio = |
3.44052 |
3.967943 |
4.202535 |
0.668734 |
169.8924 |
Audit risks are to be analyzed using the analytical and audit procedures. In the first case, audit process has been helpful in the analysis of the risks which are concerned with the business. These risks can be of several types. Significant steps have been taken to mitigate risks from the appointment of internal or statutory auditors and thus the hiring of experts can be done to mitigate risks in various segments (Gay & Simnet, 2015)
Conclusion
Going by the overall study conducted on Wesfarmers, it can be commented that the company has complied with the principles of corporate governance and adhered to all the disclosures requirements. The ethics with which the business is performing is enabling the business to cement their position in the industry. Moreover, the auditors can further comment on the business performance through various mechanisms such as ratios, report, etc.
References
Kaplan, R.S. (2011) Accounting scholarship that advances professional knowledge and practice. The Accounting Review [online]. 86(2), pp. 367–383. Available from https://doi.org/10.2308/accr.00000031 [Accessed 27 April 2018]
Elder, J. R, Beasley S. M. and Arens A. A. (2010) Auditing and Assurance Services. Person Education, New Jersey: USA
Fazal, H. (2013) What is Intimidation threat in auditing?.[online]. Available from: https://pakaccountants.com/what-is-intimidation-threat-in-auditing/ [Accessed 27 April 2018]
Gay, G. and Simnet, R. (2015) Auditing and Assurance Services. McGraw Hill
Deegan, C. M. (2011) In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill
Needles, B.E. & Powers, M. (2013) Principles of Financial Accounting. Financial Accounting Series: Cengage Learning.
Parrino, R, Kidwell, D. and Bates, T. (2012) Fundamentals of corporate finance. Hoboken, NJ: Wiley
Peirson, G, Brown, R., Easton, S, Howard, P. and Pinder, S. (2015) Business Finance, 12th ed. North Ryde: McGraw-Hill Australia.
Petersen, C. and Plenborg, T. (2012) Financial statement analysis. Harlow, England: Financial Times/Prentice Hall.
Wesfarmers. (2017) Wesfarmers 2017 annual report and accounts [online]. Available from: https://www.wesfarmers.com.au/util/news-media/article/2017/08/17/2017-full-year-results [Accessed 27 April 2018]
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