Wesfarmers Effectiveness and Acquiescence

Question: Discuss about the Wesfarmers Effectiveness and Acquiescence. Answer: Introduction: The internal control of Wesfarmers assists in ensuring attainment of organizational objectives in dependable financial reporting, operational coherence and effectiveness, and acquiescence with policies, rules, and regulations. It comprises everything that control organizational risks (Parrino et. al, 2012). Wesfarmers internal control serves as a means to monitor, measure, and direct its resources. It also plays a key role in discovering and avoiding frauds, and safeguarding both its intangible and physical resources (Horngren, 2013). Therefore, the internal control of Wesfarmers Group is high. Internal control Good / Bad Reasons Risk assessment framework Good Wesfarmers risk management framework describes the controls of risk management and the overarching principles implanted in its risk management process, reporting systems and methods, and allocation of major risk management functions betwixt its Finance Director and Managing Director, the Board, Risk and Audit Committee, and Divisional Management. This framework is reviewed by the Board and approved in May 2016 (Wesfarmers Limited, 2016). Group policies and procedures Good Wesfarmers Group policies and procedures assists in managing treasury options and financial risk like movement in interest rates and subjection to foreign currencies. Operating framework and effective due diligence systems Good Wesfarmers operating framework defines the reports and activities of the Board, divisional board, and Board Committee. It assists in defining ways Wesfarmers does business and promotes corporate identity and culture (Wesfarmers Limited, 2016). Furthermore, Wesfarmers adopts an appropriate process of due diligence in its management especially for purposes related to divestments and acquisitions. Comprehensive risk financing program and formal corporate planning procedures Good Wesfarmers risk financing program includes risk transfer to re-insurers and external insurers and its formal corporate planning procedure necessitate each of its divisions to evaluate their trends that are more likely to impact and mould their industry, and in relation to such purpose, preparation of SWOT analysis and performance of situation planning is very crucial. Monthly reporting and annual budgeting systems Good Wesfarmers monthly reporting and annual budgeting systems for all its businesses, assist in the monitoring of development against targets of performance and assessment of trends (Wesfarmers Limited, 2016). It also pursues crisis management systems for each of its key businesses. Audit plan Wesfarmers is a big organization with its shares listed in the Australian Stock exchange. In Wesfarmers, Audit planning refers to a process where strategies are framed to conduct anticipated outcomes and extent of companys audit. However, the nature, size, and time for audit can be different as it relies on business size. Furthermore, if its business is widespread, then strategies implementation will consume more time and the aggregate scope of audit plan can enhance (Cappelleto, 2010). Therefore, this planning is primarily a systematic method where the audit in control can review the internal environment and financial processes together with the preparation of engagement. It is presumable that such audit planning begins towards the initiation of an audit engagement. Besides, as per ISA 300, it must not be viewed as a separate and discrete section of an aggregate audit. It initiates shortly after, or in relation with completion of prior audit, like with a review of concerns such as unadjusted errors or control deficiencies (Cappelleto, 2010). These are significant to upcoming audits and must be considered during planning. Audit Risks before and after the scandal The audit risks before the scandal comprised of the pumped up earnings that was done by the employees that led the company to restate the profit. Hence, this was altogether not traced by the auditor and impacted the working. After the scandal, the audit risk will be to trace the significant deviations and ensure that other misstatements do not happen. There are various departments and hence, a deviation can happen. The audit risk even consists in inflating the accounts, exaggerating the expenses, etc. The entity has an independent audit committee. As an auditor, we will have to work closely with the audit committee which has independent directors to protect the interest of the shareholders. Measures undertaken by them in order to stop these activities will have to be closely verified New Audit plan The internal controls of the company will closely have to be looked into. The internal control in respect to the approvals of the rates and the supplier with whom the products are purchased for selling to the consumers of these goods will have to be checked. The quotations from the suppliers will have to be cross verified with the market rates independently if not in an extensive manner but randomly. Past trends and the projection of income will have to justify with evidences (Baldwin, 2010). In the present case, a sudden growth would have definitely been questioned by the auditors as to how can the rates offered by the suppliers can slash so much that the entity has been able to earn an extra income of 40% and that too only in the first half of the year (Wesfarmers Limited, 2016). Comparison of expenses in terms of percentage of turnover will have to monitor for previous years. In this case, it is clear that external confirmation from the suppliers would have also proved to be falsi fication of information, so for the 2017 audit plan it is necessary to obtain an expert opinion or get the rates as stated by the current suppliers of the company confirmed by the third party so that an approximate rates can be obtained which can be compared with the current rates as stated in the financials. Brainstorming session with the operations department of organization will also help (Heeler, 2009). They can be asked to justify the fall in rate from the supplier. References Baldwin, S 2010, Doing a content audit or inventory, Pearson Press. Cappelleto, G. 2010, Challenges Facing Accounting Education in Australia, AFAANZ: Melbourne Heeler, D 2009, Audit Principles, Risk Assessment Effective Reporting, Pearson Press. Horngren, C 2013, Financial accounting, Frenchs Forest, N.S.W, Pearson Australia Group. Parrino, R., Kidwell, D. Bates, T 2012, Fundamentals of corporate finance, Hoboken, NJ: Wiley Wesfarmers Limited 2016, Wesfarmers Limited Annual Report and accounts 2016, viewed 29 September 2016, https://www.wesfarmers.com.au/util/news-media/article/2016/08/24/2016-full-year-results