Marks: 25 marks

Weight: 25%

File submission: format (.doc or .docx)

Instructions

Please read the unit outline for more details.

The basic report format is a cover page, a table of contents, page numbers and headings.

You must ensure that you are using materials that are yours. If you copy any reference that is

not yours, use proper referencing. The teaching team can use Ouriginal to guarantee the

authenticity of your answers. Coping materials that are not yours can indicate a sign of

plagiarism which is against UC policies. We recommend you take the Academic Integrity

Module (AIM) in case you are unsure. Students who commit academic misconduct, such as

plagiarism etc., will be in breach of UC policies and will face a summary inquiry conducted by

the Associate Dean of Education.

Referencing style is Harvard, and you should include a reference list and in-text citations,

where necessary.

The discussion question requires you to provide evidence that supports your arguments,

including primary sources (journal articles, accounting standards and other regulatory

documents).

Please respond to all questions as best as possible.

Part 1 is worth 8 marks and consists of short answers.

Part 2 is worth 17 marks and consists of a report-style question.

Feel free to reach out to your tutors or to me if you have any questions,

DavidPage 2 of 6

PART 1

INSTRUCTIONS - 8 MARKS

Part 1 focuses on you applying your skills from the first part of the unit (Week 1-6). There are some

elements of application, explanation and some minor calculations. The goal here is to explain and

evaluate the audit process.

SCENARIO: OLD MOON FINE FOODS

You are currently planning the audit for the year ended 30 June 2025 for a large retail business that

operates a range of stores across Australia and New Zealand. The retail business specialises in

imported food and wine, and especially in luxury or high-quality goods. This is your first engagement

with this company.

Given the current economic climate, characterised by a series of events with stubborn inflation and a

cost of living crisis, the business has been struggling with declining sales. Sales across 2023 and 2024

declined by 20% and management predicted a larger percentage decline into 2024 if nothing changed.

In response, the business has decided to open a chain of discount grocery stores in both Australia and

New Zealand, largely copying the business model from other discount supermarket chains in Australia

so as to attract a new market. While the business has been able to use its existing distribution

networks, the business has had to invest in and outfit 15 new stores, spend money on advertising and

building brand networks, source and order a new product range, and hire and train a new workforce.

The business has borrowed $240 million for this new business.

Sales have been steady in the new concept stores, with sales tracking slightly above predictions.

However, the discount model is based on a significant volume of sales. Consequently, the business

expects a large loss in year 1, and predicts only a small return (profit) in year 2.

In an attempt to offset the impact of the new business, the company has changed its inventory

ordering processes in the premium food and wine business. While it used to carry highly specialised

items and promise customers it would have such items in stock, the business has cut some of its more

obscure and specialised lines. This has made its inventory ordering and warehousing more efficient,

but has also lead to some customer complaints and customer loss. The company has also changed its

debt terms. While it used to offer established clients up to 45 days to pay debt to the company, the

company has recently reduced this to 23 days, with the belief that this will bring cash faster into the

business. Management estimates that 4% of customers have left as a result of this change.

You are provided the following financial information

ACCOUNTS/AMOUNTS ($M) FORECAST

31 DECEMBER 2024

ACTUAL

30 JUNE 2023

NET ASSETS 1,351 1,299

PROFIT BEFORE TAX (234) 306

REVENUE 2,652 1,691

TOTAL ASSETS 2,351 2,624

Management seem genuinely committed to the success of both businesses, but they do admit that

their expertise is not in discount grocery. They have an effective internal control system for the luxury

food and wine business, but management admit that this control system needed significant updating

to work for a discount retailer. You note that there are gaps in how the control system is being used

across all types of stores.Page 3 of 6

Required:

1. In a paragraph, explain any risks that you perceive in this company. (2 marks)