You are part of the audit team required to prepare a preliminary report to the senior partners of your auditing firm. This report will be used to determine whether or not the auditing firm should consider tendering for the audit of Alto Metals Limited (ASX code- AME).
You and a colleague have been assigned to prepare a report based on your research of Alto Metals Limited. The report must cover the areas detailed below. This will require extensive research and critical analysis of the annual report and any other information that you have obtained.
The Alto Metals Limited report
In your report you must address the following issues:
1. Provide an overview of the client's business and industry in which it operates.
2. What are the significant business and audit risks for mining companies? You need to explain at least FIVE (5) risks.
3. What are the specific reporting requirements (standards and/laws or regulations) for mining companies. You need to list FIVE (5) standards and /laws or regulations).
4. Referring to the financial statements data for 2016 and 2015 from the annual report, analyse the year-to-year changes in the account balances for at least five financial statement line items of concern.
- Explain why you have identified these particular items.
5. The company has again made losses in 2016
- Using the annual report calculate at least five common ratios that are useful to assess going concern status.
- Explain the possible financial difficulties that the company could incur.
6. Conclusion
- Based on your ratio calculations and assessment of the client's business and audit risks, would you undertake the audit? Why?
- What are the limitations of your report?