Audit Risk Assesment and Planning

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A2B’s Operations

The operations which the A2B Australia conducts are (A2B Australia Limited Annual Report , 2019):

  • 13 cabs: It is the Taxi network which A2B operates in whole Australia. It had vehicle fleet over 10000. It is firmly established in big cities of Australia like Melbourne, Sydney, Brisbane and Adelaide. It provides 24/7 booking services through three Australian-based contract centers. 
  • Mti: It is basically the service of software development. Mti develops the advanced and innovative saaS dispatch and booking service platforms.
  • Cabcharge: It is the account payment system which was established in 1976 in order to facilitate the taxi passengers to pay for the fare. This system is the alternative of cash payment system. 

A2B’s Going Concern

It is the responsibility of an auditor not only audits the financial statement of the company but also relates the management use of Going Concern’s principle in the preparation of the financial statement. ISA 570 is the international standard of Auditing which relates to the Going Concern principle (INTERNATIONAL STANDARD ON AUDITING 570 (REVISED)GOING CONCERN, 2016). The areas which may significantly doubt on the A2B’s ability to continue as a going concern are:

  • Decrease in cash and cash equivalent from 22,253(FY18) to 19,172(FY19). The reason for this decline is the reduction in net cash flow in operations in FY19 as compare to that of FY18. Company receives less amount from its credit customers in FY19. However, there is no negative cash flow in operating cash flow which is the biggest factor in considering significant doubt on company’s Going Concern principle.
  • Increase in contract, trade and other payable to 37,913 from 32,940 (FY18). The reason for this increase is the contract liabilities company have of 9091 in fiscal year 2019. And in 2018 there were no contract liabilities.
  • The provision of employee’s wages and salaries have been increased this year due to increase in wages in future.
  • Increase in Impairment loss on trade receivables arising from contracts with customers to 1360 from previous year which was 466.
  • The company’s total debt to equity ratio is 12.77% which means company relies on equity financing so investor will expect more profit on investment so future dividends might increase. Equity investment is risky as there might be chance where company’s actual owners can lose their control in future (Advantages vs. Disadvantages of Equity Financing, n.a).

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