Please provide executive summary , introduction and conclusion

Section 1: Risk Assessment - Domino's Pizza Enterprises Ltd (FY2024)

1.1 Planning Materiality

Planning materiality is a threshold used by auditors to determine the significance of misstatements in the financial statements. For Domino's Pizza Enterprises Ltd (DPE),revenueis the most appropriate base because net profit in FY2024 was volatile due to restructuring, store closures, and foreign market challenges. Revenue, at AU$2,376.7 million, is more stable and provides a reliable benchmark for users of the financial statements (Domino's Pizza Enterprises Ltd, 2024).

Industry benchmarks suggest a range of0.5%-1% of revenue. An initial rate of 0.5% produces materiality of AU$11.9 million. However, considering events such asstore closures in Japan and France, litigation risks, and shareholder class actions, audit risk increases. Consequently, the percentage is adjusted downward to0.4%, resulting in a lower materiality threshold of AU$9.5 million. This adjustment ensures the audit remains conservative given the heightened risk environment.

Table 1. Planning Materiality Calculation for DPE (FY2024)

Base selected (FY2024)	Amount ($m)	% applied	Materiality ($m)
Revenue (initial)	2,376.7	0.5%	11.9
Revenue (adjusted)	2,376.7	0.4%	9.5

1.2 Audit Risk Assessment

The overall audit risk for DPE in FY2024 is assessed ashigh. This classification is supported by several factors. First, operational disruptions from significant store closures increased the likelihood of impairment misstatements. Second, volatile profit performance created potential management incentives to present results more favourably. Third, litigation risks, including a shareholder class action alleging misleading statements, heightened the risk of unrecorded or undisclosed contingent liabilities (Reuters, 2024a). Finally, board and management turnover during the year raised concerns over the robustness of internal controls (The Guardian, 2024). Collectively, these issues support a high audit risk decision, necessitating expanded substantive procedures.

1.3 Accounts Requiring Additional Audit Effort

Two accounts warrant particular focus in the FY2024 audit:

Property, Plant, and Equipment (PPE) and Right-of-Use Assets Given store closures and restructuring, there is an elevated risk of overstated carrying values. The primary assertions at risk arevaluation(possible overstatement of recoverable amounts) andexistence/rights(closed stores may remain on the books).

Provisions and Contingent Liabilities The shareholder lawsuit and restructuring provisions create significant risk of misstatement. Assertions at risk arecompleteness(failure to record all relevant liabilities) andvaluation(understatement of provision amounts).

1.4 Audit Procedures for Assertions

ForPPE and Right-of-Use Assets:

Valuation:Reperform management's impairment tests, challenge cash flow forecasts against historical performance, and conduct sensitivity analyses on discount rates and revenue assumptions.

Existence/Rights:Inspect lease agreements, confirm store closures with landlords, and reconcile store asset registers to the general ledger and closure schedules.

ForProvisions and Contingent Liabilities:

Completeness:Obtain legal letters from external counsel, review subsequent events, and examine board minutes for evidence of claims.

Valuation:Evaluate management's estimation models, test assumptions for reasonableness, and compare against external legal or restructuring advice.

1.5 Analytical Procedures

Analytical procedures should supplement detailed testing. For instance, ratio analysis oflike-for-like store revenueby geography can reveal anomalies requiring deeper testing. A reconciliation ofprovision movementsfrom opening to closing balances helps identify unusual adjustments. Gross margin trend analysis by market also highlights possible misclassifications or errors (Domino's Pizza Enterprises Ltd, 2024).

Section 2: Research - Enron and the Evolution of Auditing Standards

2.1 Lessons from the Enron Collapse

The collapse of Enron in 2001 revealed critical failures in auditor independence, governance, and disclosure. Arthur Andersen, Enron's auditor, provided both audit and consulting services, creating conflicts of interest and weakening professional skepticism. Enron used special purpose entities to hide debt and inflate earnings, practices that highlighted deficiencies in oversight and transparency (Healy & Palepu, 2003).

2.2 Post-Enron Regulatory and Standards Developments

The U.S. responded with theSarbanes-Oxley Act (SOX) of 2002, which fundamentally reshaped audit regulation. SOX established thePublic Company Accounting Oversight Board (PCAOB), enhanced auditor independence rules, and introduced management and auditor reporting on internal controls (Zhang, 2007). Section 404 in particular required companies to evaluate and disclose internal control effectiveness, with auditors providing assurance.

Empirical evidence supports the benefits of these reforms. For example, firms that remediated internal control deficiencies experienced improvements in accrual quality and lower costs of equity, signalling greater investor confidence (Ashbaugh-Skaife et al., 2008). PCAOB inspections also enhanced audit quality by holding firms accountable for deficiencies (PCAOB, 2006).

2.3 Current Audit Climate

While Enron-style collapses are less common in the U.S. today, audit failures have not disappeared. PCAOB enforcement continues to uncover issues in professional skepticism, complex financial reporting, and technology-related disclosures. However, the frequency and severity of large-scale frauds have declined in jurisdictions with strong enforcement and internal control regimes (Ashbaugh-Skaife et al., 2008; Zhang, 2007). The regulatory evolution has therefore improved audit reliability, though ongoing vigilance remains necessary.

References

Ashbaugh-Skaife, H., Collins, D. W., Kinney, W. R., Jr., & LaFond, R. (2008). The effect of SOX internal control deficiencies and their remediation on accrual quality.The Accounting Review, 83(1), 217-250. https://doi.org/10.2308/accr.2008.83.1.217

Domino's Pizza Enterprises Ltd. (2024).FY24 Appendix 4E/Annual Report. Retrieved from Domino's investor relations site.

Healy, P. M., & Palepu, K. G. (2003). The fall of Enron.Journal of Economic Perspectives, 17(2), 3-26. https://doi.org/10.1257/089533003765888403

Public Company Accounting Oversight Board. (2006).Lessons from Enron: The importance of proper accounting oversight[Speech]. PCAOB.

Reuters. (2024a, September 9). Australia's Domino's served with class action on 'misleading Japan market comments'. Reuters.

Reuters. (2024b, August 27). Domino's Australian franchise operator swings to first annual loss, shares tank 20%. Reuters.

The Guardian. (2024, February 14). Domino's Pizza Enterprises faces board changes amid financial strain.

Zhang, I. X. (2007). Economic consequences of the Sarbanes-Oxley Act of 2002.Journal of Accounting and Economics, 44(1-2), 74-115. https://doi.org/10.1016/j.jacceco.2007.03.003