Audit and Assurance Assignment Essay Example

Auditing And Assurance 3

Auditing and Assurance

Auditing and Assurance

Bellamy’s Australia is one of the largest foods and beverages company in Australia. It’s also the parent company of Bellamy’s organic which is also the largest producer of infant food in the Australian economy. Bellamy Australia was formerly called Tasmanian pure food limited before rebranding. The company started, as Bellamy’s organic in Tasmania, and it was a family operated business. Later it was bought and done a private business, and in 2014 it was rebranded to Bellamy’s Australia. Due to its significant successes the company got listed on the Australian stock exchange. It conducted extensive trading which led to over 30 percent rise in its share prices. Thus it got deemed an outstandingly successful company by different financial commentators. Thus we can say that Bellamy is among the businesses that produce 100 percent Australian made organic foods which are certified by the government. It supplies these products to different supermarket chains, pharmacies, and stores across the country. The company also has an online portal where it sells its products directly to the customers (Aithal Shailashree and Kumar, 2015).

Bellamy exports its product to different countries especially China, Hongkong, Singapore, Malaysia, New Zealand, and Vietnam where it has a large customer base. As a result of this huge customer base in Asia countries, the company opened an office in Shanghai and Singapore. Bellamy’s Australia is run by different executive directors some of which are independent and also has one managing director who is also the CEO. During July 2014, the company sold over 10.9 million existing shares, and also over 25 million new shares thus different financial reviews in Australia described it as one of the best-performing companies currently in the country (Portfolio, 2016). In the Australian stock exchange, shares of this company got embraced quickly by different investors leading to a 34 percent rise in value and that is the first day of trading. The prices continued rising due to positive reviews by various financial analysts thus, in the end, gave the company a market capitalization of 124million dollars. The company remains active in the market even in the current period. It is an indicator of good management and also useful strategies and plans which lead to it meeting its goals and achieving more.

The company deals with wide range of products. These include baby formulae, follow-on formula, and milk for toddlers, baby rice, and apple and cinnamon breakfast, teeth risks, ready to serve baby meals and also vegetable macaroni’s. The products of Bellamy’s Australia target three different age groups which include newborns, infants, and toddlers. In 2014 the company expanded its production to fit kids who were above three years by including organic milk drinks which acted as supplemental foods for additional energy and nutrients to the toddlers. Bellamy’s products are the only Australian certified organic infant formula products thus hold a premium position in the Australian organic market. The baby food and formula experienced growth in the year 2013 due to the baby formula component which had the largest increase in its value. As a result, Bellamy obtained a more than 3 percent share in the overall baby foods market and also holds a 10 percent share in the baby formula market share.

The company was estimated to have 95 percent share of the overall organic foods thus holding the largest market segment in the country. Due to its overseas market share, 15 percent of its overall revenue during the 2014 financial year came from foreign countries. The company is one of the biggest exporters of organic foods to different countries thus making it very competitive in the market. So as to maintain this, the company establishes offices in the various countries mainly in Asia so as to handle marketing, product promotion and customer care and relationship maintenance quickly and to enable good products and services distribution in the area. Any significant regulatory body does not regulate the operations of this company both under the Commonwealth laws and by any other state laws.

The corporation has also expressed a desire to expand its product markets to both the United States of America and the UK and the plans are already underway in implementation. Its success has made the company a good example in the book “principles of marketing” as the success of the enterprise gets attributed to its sophisticated and above average market research and also the ability to conduct timely launching of products together with the provision of good offers into the market. A highlight of the success journey of the company is when it’s CEO and managing director Laura McBain got named the Telstra Tasmanian businesswoman of the year during the years 2014 and 2015 respectively, and as a result, the company got called the best regional midmarket business in the 2014 mid-market awards in the country.

Bellamy Australia has also faced its share of problems. Different investors reduced their investment in the companies’ stocks when it meets import regulations from the Chinese also resulted from lower sales during events like the China singles day shopping event. The company also faced problems internally, and they include smaller investments as compared to its competitors, giving discounts which end up damaging the product and brand and also the use of bad distribution strategies in the supply of its products. As a result, the company feels the need to improve and create a momentum on its brand promotion and also improve on its relation to the conditions set by the Chinese government so as to have a positive impact and induce a rise in its market share. Disclosure on sales volumes, market share, and costs in the supply of products play a significant role in regaining the investors’ confidence in the company. Bellamy needs to come up with a good team to help in the formulation of goals and strategies which aim at regaining its market share and also competitiveness in the organic business market.

As a result of the company’s success in its business ventures and the amount of capital used plus the amount of revenue acquired in the form of returns on investments, auditing is an important tool in ensuring that transparency and accountability get guaranteed in the company. Verification involves checking of financial books and documents so as to check and verify correct recordings of business undertakings and also to ensure that the financial position held by a company is accurate and legal (Li Zhang and Wang, 2014). As a result, it is clear that auditing is the assessment of different financial records of either a company, a department in the business of a particular organization to ensure accuracy and efficiency in the files and methods used to show it.

Auditing is a requirement in different countries, and the need for an audit arises, as a company may need to ensure that all its records are correct before releasing them to the relevant bodies. In businesses like Bellamy’s which have many business ventures, an audit helps in ascertaining that all financial records have been prepared in the correct way showing the flow of business undertakings and transactions for a particular period of the fiscal year thus creating the right picture and position of the company in the market. Audits help in detection of errors, and thus prevention as some mistakes mess up the records quickly (Berry and Gribble, 2016). It makes auditing critical to any given company and thus making it a requirement for a specified period.So as To manage Bellamy’s Australia Limited actually, verification is necessary, and it can either be conducted as an internal audit or an external audit.

In internal auditing, the company uses auditors who work for the enterprise to check the records while in external auditing, accounts with no connection to the company whatsoever get called to carry out verification (William Glover and Prawitt, 2016). As a result, it is clear that an external audit is more efficient than an internal audit as lack of connection to the company makes the auditors conduct a thorough job without influence from any interested party. Cases of fraud, bribing and even favoring individual departments are usually evident in internal audits, as the auditors get lenient at times when dealing with fellow workmates due to employee relationships created for the duration they have worked together in the same environment.

Thus auditing helps ensure policies and regulations are being followed and necessitate the provision of valuable improvements in the formulation of future policies for the company. A company needs to review its management from time to time to ensure growth and productivity of all its employees. Audits help detect employees who do not perform their duties as required and to correct this; they are either laid off of warned and motivated to improve their skills (Lewis, 2016). It enhances the morale of the employees as they avoid making errors or getting involved in corrupt activities during their time of employment thus resulting in an increase in their performance and the overall performance of the company (Bewley, 2017). It is with the conduction of audits that the company gets to know where there is misappropriate use of goods and also know the manipulation of records and check on it.

When audit reports get released to the world, investors gain confidence with the company as they get to decide whether or not to invest their capital into the company’s business operations. Pest analysis is a major factor in determining how different environments influence the business and also how these conditions affect the clients of the enterprise. A pest analysis is a process used in the identification of the political, economic, social, and technological factors that affect business activities both locally and internationally. The pest analysis is a useful tool as it helps the company gain a better understanding of the environments it operates on and also knows both present and future external factors that impact on the business especially in the production of products and delivery of services to different clients in different locations. An advantage of the pest analysis is that it can be conducted on customers so as to know their requirements and gain insight on their needs. Changes in a particular business environment provide different opportunities for the organization but can also lead to the emergence of different and significant threats. Pest analysis gets applied in the analysis of the political, economic, social-cultural technological changes occurring in the business environment (Ho, 2014). Bellamy’s Australia gets affected by different factors which either lead to a fall in its market share and productivity or a rise in both which result in higher competitiveness. This tool is useful to the company due to the following reasons;

  • It helps the company in identifying opportunities and also provides warnings in case some threats can harm the business.

  • It also shows the direction of change for business thus helping in shaping the business towards that direction to enable simple working with the modification.

  • Bellamy’s use of this analysis allows it to start projects which seem fit for the market and thus enabling it to avoid failure which gets caused by reasons which are beyond the company’s control.

  • The tool is important in avoidance of making assumptions which lead to adverse effects in the future especially when a corporation is trying out a new market in a different country, region. Positive use of this analysis creates a positive and objective view in the expansion of the market segments.

Each component of the pest analysis checks on different factors affecting the business and the clients.In the political elements, Bellamy’s Australia is affected by various changes occurring to the governments where it holds a market share. An example is in the Chinese market where the business witnessed a drop in its sales due to the introduction of new import regulation rules for the company products. An election and even the people in the government play a significant role in determining the operations of the business in the area. Another factor is the property rights and also rules put in place to curb negativities like crimes and corruptions and how favorable they are for the company (Gupta, 2013). Factors that affect the client include the corporate social responsibilities and also the customer protection legislation.

Different economic factors affect the business also. They include the stability of the current economy regarding growth, the exchange rates in the stock market and how they are is necessary to know the effects of globalization on the economic environment so as to adapt to change. For clients, the rate of unemployment in the area is a huge factor as shown by the pest analysis. The level of disposable income determines whether customers can afford the products and services in provision. Another component of the pest analysis is checking the social-cultural environment factors that affect this environment include the growth in population in the given area or country, the most prevalent generation in the society. Regarding the factors that affect the clients, it is important to check the level of health in the community, the infrastructure available for use by the clients, employments patterns, and attitudes of the clients towards the business.

Technological factors that should be put into consideration include the emergence of new technologies and their effects to the operations of the business, change in infrastructure related to the firm and adoption of different technologies by competitors and the effects this has on the company (Lobo and Zhao, 2013). Such is evident in Bellamy’s as currently, it’s stiff facing competition from different competitors leading to a fall in its share prices which in turn discourage investors. Another factor is the adoption of new technologies and how easy they are for the clients to use them.An example is where many companies use information and communication technologies to carry out business i.e. product promotion, marketing and even communication with customers regarding sales and aftersales services. Some client doesn’t have the knowledge of using this technology and also the accessibility of such technologies thus these factors end up affecting the company negatively.

There are also different audit risks that face the company during the process of auditing. These risks lead to the expression of inappropriate opinions especially on financial statements during auditing (Blankley Hurtt and MacGregor, 2014). Such inappropriate conclusions include issuing of an unqualified report after conducting an audit, failing to emphasize on relevant sections in the audit report and much more. An audit risk is thus evident due to the combination of different risks encountered during the conduction of an audit. As evident in the Bellamy’s Australia audit reports for the year 2016, it’s clear that all stakeholders should get involved in the process of conducting an audit. A proper review reflects good performance by all the concerned, interested parties and a bad audit reflects negatively on the company (Whitworth and Lambert, 2014). The first risk is the inherent risks which are shown through a misstatement in financial statements which arise due to omission errors. About Bellamy’s Australia which has a higher trade and exposure level, occurrence if inherent risks may be higher because of the vast complex in judgments and transactions by the company.

The control risk arises in the case of failure in certain operations of relevant departments of the business. Inadequate control in the form of management, policies, and regulations lead to a lack of detection of cases like fraud and misappropriate recording of transactions thus causing the audit risk (Glover and Prawitt, 2014). The last risk is the exposure risk and occurs when the auditors do not detect all the high risks and other involved risks. These happen if the auditors do not follow the correct auditing procedures (Council, 2014). In a company like the Bellamy’s Australia, an inherent risk of 60 percent means that detection risks should be set at 27 percent to avoid overall auditing risk from surpassing the 10 percent limit. The 2016 audit on the company got conducted by PricewaterhouseCoopers which are an external auditing company (Rapoport, 2013). After the audit, a representative of the company is always available especially in general meetings to answer any questions related to the review.


Aithal, P.S., Shailashree, V.T. and Kumar, P.M., 2015. A First-hand Technique to Analyze Business Models & Concepts.

Blankley, A.I., Hurtt, D.N., and MacGregor, J.E., 2014. The relationship between audit report lags and future restatements. Auditing: A Journal of Practice & Theory33(2), pp.27-57.

Bewley, R., 2017. Nobody expects the Spanish Inquisition!. Professional Planner, (94), p.40.

Berry, N.J. and Gribble, K.D., 2016. Health and nutrition content claims on websites advertising infant formula available in Australia: A content analysis. Maternal & child nutrition.

Council, F.R., 2014. Audit Quality Inspections, Annual Report 2013/14. London: FRC.

Lewis, G., 2016. Bellamy’s Organic: Providing babies and young children with a bright start to life. Part 1 Case Study.

Lobo, G.J., and Zhao, Y., 2013. The relation between audit effort and financial report misstatements: Evidence from quarterly and annual restatements. The Accounting Review88(4), pp.1385-1412.

Glover, S.M., and Prawitt, D.F., 2014. Enhancing auditor professional skepticism: The professional skepticism continuum. Current Issues in Auditing8(2), pp.P1-P10.

Ho, J.K.K., 2014. The Formulation of a systemic PEST analysis for strategic analysis. European academic research2(5), pp.6478-6492.

Gupta, A., 2013. Environmental and Pest analysis: An approach to the external business environment. Merit Research Journal of Art, Social Science, and Humanities1(2), pp.013-017.

Li, Y., Zhang, D. and Wang, X., 2014. The influence of business governance organization on internal control audit report lag: evidence from China. Accounting & Taxation6(2), p.101.

Portfolio, N.I., 2016. For personal use only.

Rapoport, M., 2013. New rules expected for annual audit reports. The Wall Street Journal Whitworth, J.D., and Lambert, T.A., 2014. Office-level features of audit report timeliness. Auditing: A Journal of Practice & Theory33(3), pp.129-152.

William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and Assurance services: A systematic approach. McGraw-Hill Education.