SWOT Analysis
a. SWOT analysis is a tool to assess the strengths, weaknesses, opportunities and threats which are used for taking strategic decisions for the company (Helms & Nixon, 2010). Woolworth can easily assess the positive as well as negative sides of the company externally and internally. For the future development of business, this analysis plays a significant role. The analysis is given below:
- Woolworths is the leading supermarket in Australia.
- The brand has strong position in the market and it has wide variety of portfolio.
- The business does strategic acquisitions to grow and develop its business in the country.
- The supply chain of the company is valuable
- Its stores are situated at good locations which are easily accessed by the customers (Hill, Jones & Schilling, 2014).
- The brand is famous in Australia but lacks in the global presence.
- The brand is also low in accepting the change and hence, has low adaptability to the changes in business environment creating more chances of risks (Hubbard, et. al., 2015).
- Growing shopping on Internet creates an opportunity for the business to sell its products online in different countries. It will help in creating global presence.
- Emergence of updated technology which could help in enhancing the productivity of business.
- Prospects of business in developing countries like India and China.
- The spending power of people has increased over the years (Aaker, 2008).
- There are so many competitors in the industry which are posing a threat to the company.
- The political issues like increase in labour rates are a big threat.
b. The analysis did above have a significant impact on the audit procedures of the company which are discussed below:
Strengths: As already discussed, the base of Woolworths in Australia is strong and it also has good connections with its suppliers which helps it in running smooth processes. The strong relationship helps the company in getting the raw material or finished products at lower prices which will help the company in earning more profits margins. The company have all its stores at the locations which are easily accessible. It creates an ease for the customers to reach the stores and thus, the sales increases. Diverse product portfolio attracts more customers and the stores earn more revenue. Woolworth has a very strong position in terms of brand value in the country which helps it in attracting more and more customers and meeting competition in the industry. The strategic acquisitions made by the company help it in accessing to more customers and to deal it in variety of products. The specialisation of the acquired company is also used to make the position strong in the competitive market (Freeman, 2010).
Weakness: Weaknesses make the company’s position low in the market and might take it profits down. Woolworth has certain limitations. Its presence is strong in Australia but it lacks its presence in global markets. In the era of globalisation, the company will face difficulties while competing with the globally recognised stores like Aldi. The company is weak in managing the change in the company as per requirements of business environment which is necessary. Low adaptability in the organisation creates more chances of risks in the organisation (Bensoussan & Fleisher, 2012).
Opportunities: It is analysed that the company has opportunities of growth in online business. The lives of people are becoming busier which is bringing online shopping into frame. People place orders online and save their time. It creates separate channel to sell products for the company and create an opportunity to make higher profits. The increase in population and in the per capita income creates an opportunity for the business to sell more products. It also has an opportunity to establish its business in emerging markets like Asian countries so that it could create its global presence and compete with the other global brands (Cadle, Paul & Turner, 2010).
Threats: Woolworths face biggest threat from its competitors. As Woolworth has no global presence, the other global competitors are taking benefit of it. For e.g. brands like Aldi are providing lower priced products to gain more customers which is not in the favour of Woolworths. The brands like Coles are fighting with Woolworths by running various marketing campaigns. That is why, the market area of other brands like Coles and Aldi are increasing year by year which is affecting the overall market share of Woolworths. The increase in taxes has increased the overall costs of the operations of Woolworths and the economic policies also affected its overall profits and pose a threat to the company (EBSCO Publishing (Firm), 2009).
Potential Impact on Woolworths Audit
The analysis gives potential insights and will help the company in planning meaningful strategies to handle various situations in the company. The SWOT analysis helped the company in analysing the strengths which can be used to face threats and opportunities can grasped and the weaknesses can be minimised.
2. Inherent Risk can be understood as a risk which is beyond the control of any business and affect the operations and activities of the business. These inherent risks can get involved in the financial statements and affect the business operations of the company. When there is a risk of material misstatements in the financial statements of the business, it can be viewed as the inherent risk in business (Griffiths, 2012).
In the process of financial audit, inherent risk occurs especially when the complex transactions take place which needs high attention. This affects the financial statements of the business.
a. (Given in the table below)
b. (Given in the table below)
c. Substantive procedures in auditing refer to the process or steps which provide the conclusive proofs or evidences for the assets of the company and accounts of financial statements. Sufficient documentation should be there in the substantive audit procedure so that the other auditor could follow the same procedure on the accounts and documents for making the conclusion.
(Refer the table given below)
d. Internal control system can be understood as the processes which help in handling the routine activities of the busi9ness. These activities of internal control helps in detecting any fraud or omission, if any and ensures that the process are fair and clear without any fraud (Akresh, 2010). Some internal control activities which could be taken to minimize the risk of the frauds and errors are given below in the table:
|
Detailed Account Balance |
|||
|
Inventory Account |
Financial cost |
Account of Sales |
|
|
(a) Explain why the account balance is at significant risk of material misstatement. |
Woolworth is engaged in many businesses which are different in nature and are treated differently in accounts. So, inventories are treated differently in each of the businesses and are presented in various styles which make the calculation of the inventory complex. It is very important for the company to pay attention to the valuation of inventory. The business rebates, discounts and other concessions should be considered properly while valuating the inventory. Because of so many complications in the accounting and valuation, there are chances of inherent risks which should be managed properly. |
Woolworths Limited is a large business organization which is engaged in multiple businesses. When the financial statements of the business are analyzed, it is observed that the company has borrowed funds from international bodies which might create inherent risks like the risk of swapping, fluctuations in current in foreign markets, variations in the economic conditions of different countries and more. These risks are to be kept in mind because these are considered in the auditing processes and affect the final result of the process of audit which should be true and fair (Bowlin, 2011). |
Due to the different nature of products and services of various businesses of Woolworths Limited, there are variations in the selling prices and revenues earned in each of the products and services of the company. When the financial statements are analyzed, it is clear that the revenue account of the company will definitely face material misstatement. Different methods have been adopted for recognizing the value which affects the overall revenue account of the business. |
|
(b) Explain the key assertion at risk of not being valid. |
The key assertions at risk which are not being valid are Existence, Completeness and valuation. Existence assertion depicts that the balance of the inventory should exist and should match with the balance of inventory given in the financial statements of the company for a given period of time. Completeness shows that the assets and liabilities existing during the period of reporting should be same as in the financial statements. Valuation means that because the methods of inventory valuation are different in Woolworths as there are so many businesses, so there might be the possibility that each inventory can be at risk of not being valued. |
Here, the key assertion is accuracy which is at the risk of not being valid. The calculation or valuation of the costs and revenues in the business might not be accurate which hampers the correctness of the final accounts (Miller, Cipriano & Ramsay, 2012). Woolworths takes loans and borrowings from international sources which involves more risk in financial terms |
The key assertion here is Occurrence. The business transactions which are recorded are of the same duration or period which and should be recognized at the same value otherwise they can be at the risk of material misstatements |
|
(c) Detail one (1) relevant substantive audit procedure to address the assertion at risk as identified in b) above. |
Inspection can be done to address the assertions in the Woolworth’s substantive procedures. By inspection, it means that physical verification of the goods will be done to check the material misstatements in the financial statements, if any. It will help in matching the level of inventory both in physical form and in the books. So that the differences can be identified (Smieliauskas, Craig & Amernic, 2008). |
The company should use analytical procedures in order to meet accuracy in their accounts and transactions. It helps in analyses of the risks of material misstatements in the financial statements of the business which involves the comparison of the financial transactions and data are compared and analyses to look out for the trend in the last few years. |
When the substantive audit of the company takes place, the occurrence of the transactions should be analyzed by taking the help of external parties. The confirmation of the debtors and third parties can be taken for making it clear (Wright, 2016). |
|
(d) Detail one (1) relevant practical internal control that would mitigate the risk in relation to the assertion at risk as identified in b) above. |
One practical internal control can be Valuation in which the managers at different stores of Woolworths will manage and valuate the inventories at their level and then it will be recorded. The materials should be recorded and at the end, balance of buying and selling should be matched to see any chances of material misstatements (Schultz, Bierstaker & O’Donnell, 2010) |
The financial authorities and department should analyze and calculate the inherent risk properly and then it should be authorized by the top authorities for bringing accuracy. The internal auditor can verify the entries in order to bring accuracy in the accounts and financial statements. |
The company’s sales are been recorded once Woolworths gives its consent and consideration. The company records the transactions and issues sales receipt which should be authorized by the related parties like the assistants of sales. The final amount of sales should be verified by the supervisor and the manager of sales. |
References
Aaker, D. A. (2008). Strategic market management. John Wiley & Sons.
Akresh, A. D. (2010). A risk model to opine on internal control. Accounting Horizons, 24(1), 65-78. doi:10.2308/acch.2010.24.1.65
Bensoussan, B. E., & Fleisher, C. S. (2012). Analysis without paralysis: 12 tools to make better strategic decisions. FT Press.
Bhattacharjee, S., Maletta, M. J., & Moreno, K. K. (2016). The role of account subjectivity and risk of material misstatement on auditors’ internal audit reliance judgments. Accounting Horizons, 30(2), 225-238. doi:10.2308/acch-51363
Bowlin, K. (2011). Risk-based auditing, strategic prompts, and auditor sensitivity to the strategic risk of fraud. The Accounting Review, 86(4), 1231-1253.
Cadle, J., Paul, D., & Turner, P. (2010). Business analysis techniques: 72 essential tools for success. BCS, The Chartered Institute.
EBSCO Publishing (Firm). (2009). Australian retail grocery case study: Challenging the dominance of coles & woolworths Datamonitor PLC.
Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.
Griffiths, M. P. (2012). Risk-based auditing. Gower Publishing, Ltd..
Helms, M. M., & Nixon, J. (2010). Exploring SWOT analysis–where are we now? A review of academic research from the last decade. Journal of strategy and management, 3(3), 215-251.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Hubbard, G., Galvin, P., 1970, Rice, J., & MyiLibrary. (2015). Strategic management: Thinking, analysis, action (5th ed.). Melbourne VIC: Pearson Australia.
Miller, T. C., Cipriano, M., & Ramsay, R. J. (2012). Do auditors assess inherent risk as if there are no controls? Managerial Auditing Journal, 27(5), 448-461. doi:10.1108/02686901211227931
Schultz, J. J., Bierstaker, J. L., & O’Donnell, E. (2010). Integrating business risk into auditor judgment about the risk of material misstatement: The influence of a strategic-systems-audit approach. Accounting, Organizations and Society, 35(2), 238-251. doi:10.1016/j.aos.2009.07.006
Smieliauskas, W., Craig, R., & Amernic, J. (2008). A proposal to replace true and fair view with acceptable risk of material misstatement. Abacus, 44(3), 225-250. doi:10.1111/j.1467-6281.2008.00261.x
Wright, W. F. (2016). Client business models, process business risks and the risk of material misstatement of revenue. Accounting, Organizations and Society, 48, 43-55. doi:10.1016/j.aos.2015.11.005
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
