Section 2 Part A
The partner has requested you to prepare a preliminary analytical review on the information provided by your company. The partner suggests that, as a minimum, you address key balance sheet and profit and loss horizontal analysis, vertical analysis and ratios over the period 2017 to 2020. Based on these results and the nature of your companys business and its markets, outline the apparent trends and changes in these ratios, the key risk areas for the audit and the matters that will have to be addressed in the audit plan. Give examples of relevant assertions and at least one audit procedure for each assertion.
Some Guidance to help answer Section 2
Do your own calculations and show all workings, do not just use ratios that may be provided in the financial reports.
This question is not just about calculations of comparative horizontal and vertical analyses, and ratios. Interpretation is required. What are the trends? Are these positive or negative from a financial management perspective? Are any movements consistent with the over-statement of profit and assets, or the under-statement of expense and liabilities? Summarise the main risks. What audit objectives (e.g. occurrence/existence) are relevant? What audit procedures are useful?
Statement of Comprehensive Income BLUESCOPE STEEL LIMITED FOR THE YEAR ENDED 30 JUNE 2020 Consolidated 2020 2019 $M SM Notes 2 3 Revenue from continuing operations Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Impairment expense of non-current assets Inventory spares write-down Freight on external despatches External services Finance costs Other expenses Share of net profits of associates and joint venture partnerships accounted for using the equity method Profit before income tax 12,573.1 140.9 0.7 (7.519.5) (1.705.3) (413.1) ) (65.6) 11,324.2 68.3 (124.5) (6,810.1) (1,780.1) (534.6) (160.7) (37.0) (539.8) (783.0) (77.0) (292.2) 12,13,17(b) 14(f) 14 f) (521.3) (853.3) (56.8) (288.5) 16(f), 17(d) 24(a).25(a) 2.8 256.3 16.4 1.307.7 41a) Income tax (expense) Profit from continuing operations (128.0) 128.3 (292.6) 1,015.1 (5.0) 1.010.1 26(b) Loss from discontinued operations after income tax Net profit for the year (4.8) 123.5 (20.0) 6.2 (1.7) 0.4 (1.6) 0.3 30.2 (9.1) 19(a) 19(a) 7.2 110.2 Items that may be reclassified to profit or loss Net (loss) on cash flow hedges - Income tax benefit Net gain (loss) on net investments in foreign subsidiaries - Income tax (expense) benefit Exchange fluctuations on translation of foreign operations attributable to BlueScope Steel Limited Exchange fluctuations transferred to profit on translation of foreign operations disposed Items that will not be reclassified to profit or loss Actuarial losses on defined benefit superannuation plans - Income tax benefit Investment revaluation Exchange fluctuations on translation of foreign operations attributable to non-controlling interests Other comprehensive (loss) income for the year 19(a) (7.3) 110) (111.3) 31.1 (8.7) (1227) 40.4 (19.3) 22 7.1 (89.7) 34.7 55.8 33.8 1,065.9 Total comprehensive income for the year Profit is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 96.5 27.0 123,5 1.015.8 (5.7) 1,010.1 Total comprehensive income for the year is attributable to: Owners of Blue Scope Steel Limited Non-controlling interests (0.7) 34.5 33.8 1,036.2 297 1.065.9 Earnings per share for profit attributable to ordinary equity holders of the Company from: 2020 Cents 2019 Cents Notes 5 5 19.9 19.8 190.9 188.5 Continuing operations: Basic earnings per share Diluted earnings per share Total operations: Basic earnings per share Diluted earnings per share 5 5 19.0 18,9 189.9 187.6 - 2 - Statement of Comprehensive Income BLUESCOPE STEEL LIMITED FOR THE YEAR ENDED 30 JUNE 2019 Consolidated 2019 2018 SM SM Notes 2 3 12,13 14() Revenue from continuing operations Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Net impairment write-back (expense) of non-current assets Freight on external despatches External services Net restructuring costs Finance costs Other expenses Share of net profits of associates and joint venture partnerships accounted for using the equity method Profit before income tax 12,573.1 140.9 0.7 (7,519.5) (1,705.3) (413.1) (65.6) (521.3) (853.3) (5.1) (56.8) (283.4) 11,526.3 42.0 113.9 (6,801.6) (1,679.7) (375.3) 216.0 (496.5) (838.9) (1.6) (112.4) 10(e) 1619 (239.9) 23/a),24(a) 16.4 1,307.7 32.6 1,384.9 Income tax benefit (expense) Profit from continuing operations 4(a) (292.6) 1,015.1 270.0 1,654.9 25(b) (5.0) 1,010.1 (26.3) 1,628.6 - (1.6) 0.3 30.2 (9.1) 18(a) 3.5 (0.1) 32.9 (25.1) Loss from discontinued operations after income tax Net profit for the year Items that may be reclassified to profit or loss Net gain (loss) on cash flow hedges - Income tax (expense) benefit Net gain (loss) on net investments in foreign subsidiaries - Income tax (expense) benefit Exchange fluctuations on translation of foreign operations attributable to BlueScope Steel Limited Exchange fluctuations transferred to profit on translation of foreign operations disposed Items that will not be reclassified to profit or loss Actuarial losses on defined benefit superannuation plans -Income tax (expense) Investment revaluation Exchange fluctuations on translation of foreign operations attributable to non-controlling interests Other comprehensive income for the year 18(a) 110.2 77.8 18(a) (7.3) 0.2 110) (122.7) 40.4 (19.3) (4.3) (13.2) 21 34.7 55.8 29.6 101.3 Total comprehensive income for the year 1,065.9 1,729.9 Profit is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 1,015.8 (5.7) 1,010.1 1,569.1 59.5 1,628,6 Total comprehensive income for the year is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 1,036.2 29.7 1,065.9 1,639.6 90.3 1,729.9 Earnings per share for profit attributable to ordinary equity holders of the Company from: 2019 Cents 2018 Cents Notes 5 5 190.9 188.5 285.8 279.8 Continuing operations: Basic earnings per share Diluted earnings per share Total operations: Basic earnings per share Diluted earnings per share 5 5 189.9 187.6 281.8 275.8 - 2 - Statement of Comprehensive Income BLUESCOPE STEEL LIMITED FOR THE YEAR ENDED 30 JUNE 2018 Consolidated *Restated 2018 2017 SM SM Notes 2 3 12, 13 14(1),22(e) Revenue from continuing operations Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Net impairment write-back (expense) of non-current assets Freight on external despatches External services Net restructuring costs Finance costs Other expenses Share of net profits of associates and joint venture partnerships accounted for using the equity method Profit before income tax 11,526.3 42.0 113.9 (6,801.6) (1,679.7) ) (375.3) 216.0 (496.5) (838.9) (1.6) (112.4) (239.9) 10,551.9 92.6 179.9 (6,096.5) (1,636.2) (378.9) (942) (473.3) (874.1) (15.2) (90.2) (231.4) 10(e) 16(f) 21(a), 22(a) 32,6 1,384.9 9.1 943.5 41a) 270.0 1,654.9 (181.7) 761.8 Income tax benefit (expense) Profit from continuing operations Profit (loss) from discontinued operations after income tax Net profit for the year 23(b) (26.3) 1,628.6 12.1 773.9 3.5 (0.1) 32.9 (25.1) (4.2) 0.7 (15.8) 18(a) 181a) 77.8 (48.3) Items that may be reclassified to profit Joss Net gain (loss) on cash flow hedges - Income tax (expense) benefit Net gain (loss) on net investments in foreign subsidiaries - Income tax (expense) benefit Exchange fluctuations on translation of foreign operations attributable to Blue Scope Steel Limited Exchange fluctuations transferred to profit on translation of foreign operations disposed Items that will not be reclassified to profit or loss Actuarial gain (loss) on defined benefit superannuation plans - Income tax (expense) Exchange fluctuations on translation of foreign operations attributable to non-controlling interests Other comprehensive income for the year 18(a) 0.2 1.7 110) (4.3) (13.2) 118.4 (36.2 29.6 101.3 (13.0) 3.3 1,729.9 7772 Total comprehensive income for the year Profit is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 20 1,569.1 59.5 1,628.6 715.9 58.0 773.9 Total comprehensive income for the year is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 20 1,639.6 90.3 1,729.9 733.3 43.9 777.2 Earnings per share for profit attributable to ordinary equity holders *Restated of the Company from: 2018 2017 Notes Cents Cents Continuing operations: Basic earnings (loss) per share 5 285.8 127.4 Diluted earnings (loss) per share 5 279.8 123.7 Total operations: Basic earnings (loss) per share 5 281.8 125.3 Diluted earnings (loss) per share 5 275.8 121.6 "Certain amounts shown here have been restated to reflect retrospective changes made to discontinued operations (refer to note 23). - 2 - Statement of Comprehensive Income BLUESCOPE STEEL LIMITED FOR THE YEAR ENDED 30 JUNE 2017 Consolidated *Restated 2017 2016 $M $M Notes 2 10,648.9 9,087.7 3 924 762.1 Revenue from continuing operations Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Net impaiment (expense) of non-current assets Freight on external despatches External services Net restructuring costs Finance costs Other expenses Share of net profits of associates and joint venture partnerships accounted for using the equity method Profit before income tax 12. 13 14(e), 23(e) 180.3 (6,151.1) (1,648.4) (380.4) (94.2) (477.1) (897.8) (15.2) (90.2) (235.5) (186.9) (4,806.8) (1,667.0) (385.4) (372.4) (462.8) (878.6 (55.4) (103.6) (251.3) 10(e) 16(1) 22/a), 23(a) 9.1 940.8 39.9 719.5 4(a) Income tax expense Profit from continuing operations (181.8) 759.0 (101.5) 618.0 Profit (loss) from discontinued operations after income tax Net profit for the year 24(b) 14.9 773.9 (201.7) 416.3 18(a) (4.2) 0.7 (15.8) 92 (1.3) (0.2) 18(a) 18(a) (48.3) (19.5) Items that may be reclassified to profit or loss Net gain (loss) on cash flow hedges Income tax (expense) benefit Net gain (loss) on net investments in foreign subsidiaries Exchange fluctuations on translation of foreign operations attributable to BlueScope Steel Limited Exchange fluctuations transferred to profit on translation of foreign operations disposed items that will not be reclassified to profit or loss Actuarial gain (loss) on defined benefit superannuation plans - Income tax (expense) benefit Exchange fluctuations on translation of foreign operations attributable to non-controlling interests Other comprehensive income (loss) for the year ) 1.7 110 118.4 (36.2) (160.6) 48.3 (13.0) 3.3 12 (122.9 Total comprehensive income for the year 777.2 293.4 Profit is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 21 715.9 58.0 773.9 353.8 62.5 416.3 Total comprehensive income for the year is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 21 733.2 44.0 777.2 230.1 63.3 293.4 *Restated Earnings per share for profit attributable to ordinary equity holders of the 2017 2016 Cents Cents Company from: Noles Continuing operations: Basic eamings (loss) per share 5 122.7 97.4 Diluted earnings (loss) per share 5 119.1 94.4 Total operations: Basic eamings (loss) per share 5 125,3 62.1 Diluted earnings (loss) per share 5 121.6 60.1 *Certain amounts shown here have been restated to reflect retrospective changes made to discontinued operations (refer to note 24) -1
