SUBJECT: AUDIT & ASSURANCE

Forecast Financial Statements

On your second day at AAs head office, you have been given the forecast financial statements for the full year to 30 June 2020, as well as the previous two years audited results.

Aussie Airlines: Consolidated Income Statement (Selected) Year Ended 30th June Currency AUD Millions (figures are rounded)

			Forecast 2020	Actual 2019	Actual 2018
		Revenue	12.0	18.0	18.0
		Expenditure
		Wages	3.3	5.0	5.0
		Aircraft Costs	4.0	4.0	3.7
		Fuel	2.5	3.0	3.0
		Depreciation	1.6	1.4	1.4
		Other	2.5	3.1	3.4
		PBIT	(1.9)	1.5	1.5
		Finance Costs	(0.2)	(0.2)	(0.2)
		Income Tax	0.0	(0.4)	(0.4)
		Statutory Profit for the Year	(2.1)	0.9	0.9

Aussie Airlines: Consolidated Balance Sheet (Selected) As at 30th June Currency AUD Millions (figures are rounded)

			Forecast 2020	Actual 2019	Actual 2018
		Current Assets
		Cash & Cash Equivalents	0.5	1.8	1.5
		Receivables	2.0	1.5	1.0
		Other	0.7	1.0	1.0
		Total Current Assets	3.2	4.3	3.5
		Non-Current Assets
		Property, Plant & Equipment	12.3	13.0	13.0
		Intangible Assets	0.7	2.0	2.1
		Other	1.0	0.0	0.1
		Total Non-Current Assets	14.0	15.1	15.2
		Total Assets	17.2	19.4	18.7
		Current Liabilities
		Payables	4.0	1.8	1.7
		Revenue Received in Advance	1.0	5.0	4.5
		Interest Bearing Liabilities	2.0	0.6	0.4
		Provisions	0.9	1.0	1.0
		Other
		Total Current Liabilities	7.9	8.6	7.6

		Non-Current Liabilities	Forecast 2020	Actual 2019	Actual 2018
		Revenue Received in Advance	0.2	1.5	1.5
		Interest Bearing Liabilities	6.5	4.6	4.3
		Provisions	0.4	0.4	0.4
		Deferred Tax Liabilities	0.8	0.8	0.9
		Other	0.1	0.1	0.0
		Total Non-Current Liabilities	8.0	7.4	7.1
		Total Liabilities	15.9	15.9	14.7
		Net Assets	1.3	3.5	4.0
		Equity
		Issued Capital	1.9	1.9	2.5
		Treasury Shares	(0.2)	(0.2)	(0.1)
		Reserves	0.2	0.2	0.5
		Retained Earnings	(0.5)	1.6	1.1
		Total Equity	1.3	3.5	4.0

QUESTION: After discovering that Aussie Airlines is a going concern, select one material account from AAs Balance Sheet and one material account from the Income Statement and prepare a brief plan for auditing each account. Give particular attention to the following:

1. An assessment of the audit risk for the account, given the information in this case study and your assumptions.

2. The relevant/significant audit assertions for this account.

3. Name two controls that you would expect management to implement for this account. How would you test these controls.

4. Describe two substantive testing procedures that you would perform in relation to this account to address the relevant/significant assertions.