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Unit 3 Audit and Assurance Level 5

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1. EXECUTIVE SUMMARY

Firms allows the external parties and organisation to have appropriate access in their operational activities, gains, expenses, losses etc. therefore, they believe that all relevant information are needed to be delivered and presented among stakeholders of firm. Moreover, these are the data set which are essentially required by investors to analyse the financial capacity and capabilities of firm. In the present report there will be analysis over the operational functioning of the Graincrop Limited. On which there has been proper determination of the facts which were being in associated with the international standard and jurisdiction. Therefore, the internal audit of an organization is comprises with accurate, clear and consistent data which will be easy to compare and present the financial data set with proper transparency.

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2. Implementation of ASX Corporate Governance Principles to the financial statements of the company

The ASX Corporate Governance Principles are required to be implemented by company so that corporate governance statement disclosed by organisation help to identify useful insights to the investors and as such, their trust can be enhanced and maximised in a better way. This is important for company so as to maximise shareholders' interest towards firm in effective manner. Graincorp Ltd Class A is one of the largest company engaged in receival and storing grains and imparts logistics services to customers. Organisation is listed on Australian Stock Exchange and has earned adequate profits in recent years. The annual earnings in 2017 financial year has increased which is a good sign for the firm as it is able to perform well in the market and satisfying customers in the best possible manner (Yan and Zheng, 2017).

Moreover, it is evident from the fact that net income was 30.9 million in 2016 year which roused to 125.2 in 2017. The figure shows that company is meeting set targets with much ease and as such, profits are attained in effective manner. On the other hand, there are various corporate governance principles as listed by ASX which are required to be disclosed in the annual report of company to enhance shareholders' trust towards company. There are certain principles which will be discussed and whether company has complied with same or not. These are explained below

Principle 1: Lay solid for management and oversight

The first principle states that roles and responsibilities of directors should be disclosed and accompanied in corporate governance statement of the company. Moreover, performance of board of directors should be evaluated and measured in a better way. The primary goal is to enhance long-term interest of shareholders' so that they may be benefited with higher dividends. Graincorp Ltd Class A has implemented this principle. The board has enhanced its charter which includes role of board in making strategy and planning for future activities. Moreover, role in preparation of budgets, remuneration policies, managing risks and audit compliance has also been attained. The power is delegated to Managing Director and CEO (Cheif Executive Officer) of the company. Furthermore, governing with the principle for solid management, Graincorp Ltd Class A has successfully complied with it. On the other hand, CEO has the responsibility for effectively monitoring performance of personnels of executive team. This is ensured by this team that to regularly assess performance and strategic issues are also carried out by the board (Karna, Richter and Riesenkampff, 2016).

Principle 2: Structure the board to add the value

The second principle deal with having adequate composition, skills and abilities to effectively release their duties and responsibilities in the best possible manner. The structure of Graincorp Ltd Class A is confined with skills and expertise to discharge duties in effective way. It can be seen as per the corporate governance statement of 2017 that company has minimum four of directors and maximum limit up to ten directors. In the early start of 2017, organisation had eight non-executive directors and one was executive director. At the Annual General Meeting (AGM), two of non-executive directors such as Mr Peter Housden and Mr Simon Tregoning were once again elected to the same post. The required skills, attributes and experiences of directors makes it possible to add value to the structure of Board. Graham Bradley which is Chairman and Non-executive director of firm has adequate skills and attributes in the business field and has remained on higher posts in various big companies as well. Mark Palmquist is Managing Director and CEO of organisation and has skills in global agribusiness (Kural, Fuglsang-Frederiksen, Johnsen and Tankisi, 2016).

Principle 3: Act ethically and responsibly

This principle clearly explains that company should act ethically and responsibly towards everything. This is evident from the fact that Graincorp Ltd Class A has focused on this principle and implemented Code of Conduct which provides guidelines for acting ethically and behaviours of employees, directors, executive team should have responsibility. Organisation has implemented Share Trading policy which prohibits dealing in securities by the directors, employees under in possession not published share price information. This policy provides specific guidelines and process for officers to take proper approval before dealing in securities of the organisation. Whistle-blower protection is also implemented which provides clarity to the company and is a mechanism where any kind of breaches shall be reported so that fair treatment can be made in effective manner. Furthermore, Graincorp Ltd Class A imparts various political donations. In relation to this, company would not use property as donation. The legitimate fees are approved and paid as a donation. Thus, it can be said that firm has effectively complied with ethical principles (Damodaran, 2016).

Principle 4: Safeguard integrity in corporate reporting

The principle states that there should be adequate formal procedures so that corporate reporting may be safeguarded in the best possible manner. Furthermore, it can be analysed that company has followed this principle as Board Audit Committee has implemented financial reporting standard and regulated the internal controls up to a high extent. External Auditor of company is Price water house Coopers which has been reviewing financial statements of company.

Principle 5: Make timely and balanced disclosure

The company has fulfilled this corporate governance structure as timely disclosure of financial statements are provided to stakeholders in the best possible manner. Quality information is imparted to stakeholders so that they may take enhanced decisions. It has also complied with Corporations Act, 2001 and discloses material information to them. Communication policy is provided to stakeholders so that needed information can be imparted (Joos, Piotroski and Srinivasan, 2016).

Principle 6: Respect the rights of security holders

The rights of shareholders are also complied by company. Graincorp Ltd Class A respects right of shareholder and convince them to attend AGM so that any suggestions or advices can be implemented so that company may improve upon the same. The company information is also accessible at company website. Investors relation program is implemented to promote clear understanding to the investors regarding outlook of the company. Moreover, electronic communication option is available to shareholders to receive information on electronic basis.

Principle 7: Recognise and manage risk

This principle is also followed by company as it has implemented Risk Management Policy and as such, systematic approach of risk management framework which are in relation to objectives of firm. Moreover, directors has the roles and responsibilities to effectively recognise and manage risk. Business risk committee is also initiated to effectually identify risk and as such, monitoring and reviewing of risks can be measured. Thus, organisation has complied with this principle.

Principle 8: Remunerate fairly and responsibly

Remuneration should be fairly provided and employees should be retained so that business may be able to achieve stated targets and profits in effective way. In accordance to this, PRNC (People Remuneration and Nomination Committee) is being implemented which guides and assists board in providing fair remuneration to all the employees. The remuneration report is also imparted which includes information of remuneration of managerial personnels. Moreover, non-executive director remuneration is also highlighted (Shi, Lim, Weitz and France, 2017).

3. Computation of financial ratios for the company Recognizing the nature of the company, what’s the company’s market overview and who regulates the client?

Risk assessment is control the risk and to identifying and measuring the risk. It is very important is to find out the financial statement are materially correct or not. Graincorp limited is an Australia based food ingredients company. In Risk assessment of the company Graincorp limited is find out that financial statement of the company is materially correct. Risk assessment ensured that agreed for safe working practices. Risk statements include five steps Identify hazard for the company, to decide who may be harmed, assess risk and take action, and make record of the findings and the last review the risk assessment.

Nature of the company

Graincorp limited company is food ingredients and agriculture business company . This company mainly focuses its activities on three grains which are wheat, barely and canola. This company allows the grain growers to set the cash price for their warehoused grain.

Company's market overview

Graincorp limited is a public company. This company ranked 81 out of 2000 companies in Australia. This company earn income mainly from the cereal grain wholesaling. In 2017 the company earn total revenue of $4668700000 sales in included in this. In Graincorp limited had 3191 employees is working in the company it included all subsidiaries. Its vision is to be a leading agribusiness as our customers. Company benefited from a record coast crop as it A$142 million. Last year it grew 10.06% from 4.16 and its net income is also improved (Dona and et.al, 2016).

Regulate the client

In Graincorp limited they focus on providing the best possible solutions for their customers or clients. The company manage health and safety and environmental risks.

Company’s business strategy

Graincorp limited company marketing strategy focuses on strengthen the business. This company included growth opportunities, expanding the business, on a capital investment get a good return. To strengthen a business it is very important, in marketing strategy they involve grain other agriculture products. Graincorp limited also manage market speculation and rumours. Throughout the year this company follow a calendar of regular disclosure. In market strategy this company used market segmentation. In this wheat classification plays an important role. Graincorp limited business strategy is who we are and what we do and where in the future. This company protects safety and health for their employees, the company put their customer in the centre and company also provide solutions for customers support and their needs. This company pursue excellence, foster innovation and continuous improvement (Ostroumova and et.al, 2016). This company engage in decision making and keep their commitments.

Particulars

Formula

2017

2016

Profitability ratios

     

Net profit ratio

Net profit / sales

2.74

0.75

       

Return on Assets (ROA)

Net profit / total assets

3.49

0.85

       

Liquidity ratio

     

Current ratio

Current assets / Current Liabilities

1.87

1.56

       

Quick ratio

Liquid assets / Current liabilities

1.00

0.84

       

Efficiency Ratios

     

Stock turnover ratio

COGS (Cost of Goods Sold)/ Average inventory

6.80

6.46

       

Receivables turnover ratio

Net Credit sales / Average accounts receivables

10.02

13.73

Ratio analysis : It is an analysis of information contained in company financial statements. It involves evaluating the performance and financial health of the company. Ratio analysis divided into six main groups that are liquidity ratio, solvency ratio, profitability ratio, efficiency ratio and coverage ratios and market prospect ratios. Ratio analysis can provide warning of a potential improvement. Ratios only compare the companies which is work in same sectors. It can be identified that company financial position is good as all ratios are adequate. Inherent risk is identified which means that company's internal auditors cannot find the same (inherent risk. 2014). It can be reduced by reviewing financial statements.

CONCLUSION

This report is based on a company Graincorp limited which is situated in Australia. This company is a food ingredients and agriculture business it focuses mainly on grains. In this report the company uses corporate governance principles which are required for maintaining trust of investors in a better way

REFERENCES

  • Yan, X. and Zheng, L., 2017. Fundamental Analysis and the Cross-Section of Stock Returns: A Data-Mining Approach.The Review of Financial Studies. 30(4). pp.1382-1423.
  • Karna, A., Richter, A. and Riesenkampff, E., 2016. Revisiting the role of the environment in the capabilities–financial performance relationship: A meta‐analysis.Strategic Management Journal.37(6).pp.1154-1173.
  • Damodaran, A., 2016.Damodaran on valuation: security analysis for investment and corporate finance(Vol. 324). John Wiley & Sons.
  • Joos, P., Piotroski, J. D. and Srinivasan, S., 2016. Can analysts assess fundamental risk and valuation uncertainty? An empirical analysis of scenario-based value estimates.Journal of FinancialEconomics.121(3).pp.645-663.
  • Shi, Y., Lim, J. M., Weitz, B. A. and France, S. L., 2017. The impact of retail format diversification on retailers’ financial performance.Journal of the Academy of Marketing Science. pp.1-21.
  • Dona, E. and et.al, 2016. Lifetime-ratio analysis in the posterior lateral line primordium.dim (xGFP).1(2048).p.300.
  • Ostroumova, E. and et.al, 2016. Non-thyroid cancer incidence in Belarusian residents exposed to Chernobyl fallout in childhood and adolescence: Standardized Incidence Ratio analysis, 1997–2011.Environmentalresearch.147.pp.44-49.
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