Audit Business Risk

Question 1 Business Risk 10 Marks You are the auditor of 'BS Limited' (hereafter BS), a mining company operating in the iron ore industry. BS operates out of the Port Hedland region in Western Australia, and currently ships over 200 million tonnes of iron ore per annum to China and India as its main customers. BS has a workforce of over 5,000 employees. BS's strategy to effectively deliver products from the mine to the market is achieved through their innovative exploration methods, iron ore processing and their plant design. BS engages with key stakeholders by working together with them to positively manage and create opportunities for Indigenous people, contribute to the success of local communities and protect the environment. Contributing to the BS success story has been their longstanding engagement with China. Your audit team are planning this year's audit for year ended 31 December 2019 and after discussions with management, reviewing minutes of Director's meetings and the preliminary analysis of unaudited 2019 financial report, you have also noted the following: . Over the last 12 months BS has invested $0.95billion into the battery market, by diversifying into copper and lithium mining processes. However, despite some success in this market, there has been criticism of the lithium carbonate extraction process and accusations of BS polluting the local water supplies in the Kimberley region (Western Australia), affecting and poisoning communities. There are also concerns among the Minerals Council of Australia that BS's lithium mining practices are questionable with last year's chemical leakage in the region resulting in another legal battle against an indigenous group. Currently there is a 'Subsequent Event' disclosure relating to a $100 million claim lodged against BS in Australia's Federal Court, for another legal matter that commenced in 2017, where indigenous group "Yindjibarndi" is claiming royalties for mining on their land. Mining royalties are paid each year by BS to the Government who then transfer them to indigenous communities. These royalties are based on a percentage of iron ore production, value estimations and subject to a number of complex variable factors, making it often difficult for accounting staff to determine the royalty payable. . Meeting minutes indicate that apart from dealing with debtors in China (see table below), BS also engages with Chinese investors and Chinese banks with over US$1 billion of procurement. Revenue from China in 2010 amounted to listo 752 million and (2019. ListA 753 million