Hunter Valley Mining Pty Ltd

Hunter Valley Mining Pty Ltd (HVM) is a non-listed, privately owned, Australian coal-mining entity that operates opencut mines in New South Wales, Australia. HVM produces some of the highest-quality thermal coal in the world. AA has been HVM's auditors for the past three years. You are currently in the audit planning phase of the HVM audit for the year ending 30 June 2024, and you have documented the following notes from the client meeting:

Client meeting minutes (extract) Business and operations update In the current year, the abundant production of cheap coal from developing economies has resulted in increased competition, driving down selling prices. HVM owns most of the 150 mining trucks that are used throughout its mining sites and additional trucks were deemed necessary to support an increase in production levels to remain competitive. To manage their cash flow, HYM entered into 50 short-term leases (of up to one year) for these additional trucks. HVM has applied the short-term lease exemption for these mining trucks in accordance with IFRS 16 Leases. Protective equipment purchases HYM purchases its protective equipment (safety glasses, gloves, hearing protection, helmets etc) from two overseas suppliers, and transactions are settled in the suppliers' respective functional currencies Chinese Yuan (CNY) and Japanese Yen (JPY). Large orders are placed with these suppliers and the supplies generally take two weeks to arrive in Australia. Payments to the suppliers are due a week after confirmed receipt of the supplies. HWVM's policy is that foreign currency transactions are converted into HYM's functional currency, the Australian dollar (AUD), using exchange rates approximating those at transaction date. Any monetary assets and liabilities denominated in foreign currencies at balance date are usually material and are re-translated at the exchange rate at that date. Casual workforce HWVM often rely on casual employees for its mining work. These casual employees submit their timesheets via email to the HVM payroll team, which is responsible for processing pay runs and accruing for payroll disbursements. These employees are often late in submitting their timesheets, sometimes taking as long as one month after they perform the work. Procurement process * Production inputs, like diesel, are purchased from a wide range of domestic suppliers. Due to staff shortages in the purchasing department, supplier statement reconciliations have not been performed regularly. These reconciliations involve reconciling supplier invoices with the purchase ledger. Additionally, while it is the procurement manager's duty to review additions and changes to existing supplier master file processed by the procurement officer, both the procurement officer and the procurement manager have unrestricted access to the supplier master file, including making changes and adding new suppliers. Management team updates Most of the members of HYM's management team left to join HVM's competitor in the first half of the financial year. HYM's finance director retired at the end of December 2023, after twenty years with the company. He was replaced by Lucy Lee, a long-time friend of the senior audit manager on the HVM audit team, Andrea McGhee. Andrea was recently a bridesmaid at Lucy's wedding