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You are part of the audit team responsible for planning the Bega Cheese (parent and the consolidated economic entity) audit engagement for 2017. You and your colleagues have been assigned to gather relevant background information and prepare a report for a meeting with your senior audit managers and partner. In the report you must address the following issues:
a. What are the areas in which Bega Cheese conducts its operations
b. Which particular laws/regulations (other than financial related categories which include legislations such as: Corporation Act 2001, Australian taxation laws, etc.) affect its operations You need to list SIX laws/regulations.

2. Identify FIVE inherent risks for the audit of Bega Cheese. For each inherent risk, identify the account or accounts that may be affected.
3. With specific reference to Bega Cheese’s corporate governance arrangements, you need to assess the likelihood of the potential reliance that could be placed on the overall control environment. Your conclusion should be supported by at least FIVE factors.
4. Recently Bega Cheese acquired the Vegemite and other Kraft brands in a $460 million deal that takes it far from its roots as a cheese producer. How will this acquisition affect your 2017 audit plan for Bega Cheese Your answer should be supported by at least FIVE factors.

5. In early 2016, Bega Cheese and Blackmores set up their joint venture- called Bemore- to supply infant formula and other nutritional foods to consumers in Australia and Asia (mainly China). However, due to regulatory change in China and intense competition the joint venture did not go as well as initially hoped. As a result, there was a dramatic fall in
the share price of Bega Cheese. How will this fall affect your 2017 audit plan for Bega Cheese Your answer should be supported by at least FIVE factors.

Areas of Bega Cheese's operations

In this part, it is clearly mentioned about the company named as Bega Cheese that function in dairy industry where they offers cheddar cheese and processed cheddar cheese and make it available in the retail and food services markets that is based in Australia (Varughese, Janda and Obermair 2014). Bega Cheese is a public listed company and possess by the shareholders where the main operations lies within manufacturing natural cheese that can be either cut or pack the cheese into the trade packs and make it accessible in the supermarket.

Addition to that, Bega Cheese had engaged in building values and managing risk after combining it with the enduring knowledge and business information that is conducted through use of innovative approaches and thoughts. Bega Cheese aims delivering number of constructive result for the stakeholders for the monetary year 2017 where the company faced confront and strong opposition at the same time. Bega Cheese makes strategies to be in the top line revenue growth that can bring improvement in the financial performance through maintaining strong balance sheet while investing purpose. Therefore, the company had been strong in partnerships that have valued customers and maintain high level of trust from the valued milk suppliers (Soh and Martinov-Bennie 2015).

  • State Environment Protection Regulations- It is the company named as Bega Cheese who had been involved in manufacturing sites that are licensed under the regulations (Simnett, Zhou and Hoang 2016). In that case, licenses are required for gaining over the stipulated performance for the emissions noted like odour, wastewater, noise and air. The company even has code of behavior that encloses with the cohesive set of philosophy as it gains over engaging in all the officers as well as employees who abides by the business and dealings with the stakeholders at the same time.
  • National Greenhouse and Energy Reporting Act 2007- It is the company named as Bega Cheese where the Group had been subject to Federal and State Environmental Regulations. Addition to that, the company reports requirements that are already mentioned in the act (Simnett, Carson and Vanstraelen 2016).
  • The Clean Energy Act 2011
  • For the year 2016, it is the Chinese authorities that had proclaimed the facts regarding regulation of sale and allocation of infant formula to China (Simnett and Huggins 2015). Addition to that, Bega Cheese is well placed for the operating purposes that depends upon the revised legislation and predicts it to come into effect for the year 2017.
  • The Protection of the Environment Act 1997
  • It is the company named as Bega Cheese who works together with the regulators and gets actively involved on matters relating to supervision events for reducing the emissions to air as well as waste water degree (Shen, Wu and Chand 2017).

As rightly put forward by Redmayne (2013), inherent risk can be termed as a pretence that takes place due to a mistake or oversight in the fiscal declaration due to a feature other than a malfunction of power. In other words, inherent risk can be termed as a risk that takes place when there is a failure of control and there are intricate transactions or situations that require high level of decision for fixation of certain factors in relation to the financial statement of the company (Seguí?Mas, Bollas?Araya and Polo?Garrido 2015). At the time of audit, there are number of inherent risks that can be recognized and these are as follows with proper justification:

  • The inherent risk that has been identified is risk management and control systems for the company named as Bega Cheese (Moroney et al. 2014). Addition to that, it is necessary for gaining facts on the risk faced by Bega Cheese and proper control systems that can minimize the risk as far as possible. It can be properly controlled over by managing the compliance systems that can access the design and effectiveness for the company Bega Cheese. Bega Cheese is a food producer and faces number of sustainability risks that connects directly to the safety of products and workforce that work for the company. The company should be given at most priority to consumer safety and any breach to those results to reputational change. It is the company whose mature quality management expresses the idea on quality declaration with absolute traceability of the overall products and elements (Moroney and Trotman 2015).
  • The other inherent risk that can be noted is financial risk and market risks. The company is exposed to the above-mentioned risks that need to manage properly (McKee 2015). Here, market risk means interest rate risk, currency risk and price risk. Bega Cheese even faces credit risk and liquidity risk. The risk management of Bega Cheese involves in an approach that deals with the unpredictability in the financial markets for presenting the data as and when required. The company even used derivative instruments such as risk exposures, foreign swap contracts that are used for hedging purposes. These financial instruments are used for hedging purposes and cannot be used for tentative trading activities. The company makes use of many techniques that is used for measuring the risks that are exposed where the company uses sensitivity analysis for interest rate, price risks and foreign exchange. Inherent risks is one of the risk that asses the internal control and policies that complements with the delegated responsibilities of management functions. In that case, it takes into consideration assessment of proper policies, internal control and procedures. The Audit Committee of Bega Cheese actually assess with the adequate resources that takes care of delegated responsibilities (Knechel and Salterio 2016).
  • Bega Cheese faces risks such as market risks in accordance to foreign currency as well as interest rate events (Junior, Best and Cotter 2014). Addition to that, the Bega cheese enters into a large variety of derived monetary instruments for running revelation where it takes into thought overseas money agreement for equivocation swap rates risks from the sale of sell abroad goods as well as purchase of imported goods. Bega Cheese faces inherent risk that can be evaluated through checking as well as evaluation at least yearly on the risk record. Furthermore, the examiner needs to gather peripheral and inner facts that are intended for to the Committee that requires intensification or appraisal of internal activities (Hay, Stewart and Botica Redmayne 2016).
  • Other risk that is faced by Bega Cheese include Inherent risk that explains a circumstances where assessor of Bega Cheese require to take into consideration that all material as well as observance risks are sufficiently shown in the monetary declaration of the company. Addition to that, the Governance & Assurance Manager and internal assessor that organize the yearly domination and declaration review preparation that information the behavior to be take on for each year in observe to key managerial risks in the trade. Furthermore, it is in agreement with the resolve of Enterprise wise risk administration structure and material monetary risks and previous audited figures (Hay 2015).
  • One of the inherent risks that are faced by Bega Cheese is Foreign exchange risks that arise from the prospect profitable business and predictable assets and liabilities that exhibit in a money that is not the unit domiciled exchange. Addition to that, Bega Cheese deals with dairy products that are uncovered to the overseas swap risk that moves in swap rate of US dollar. Nevertheless, Bega Cheese engage in acquire that comprise resources tools, component and covering that essentially depiction to the actions in exchange rates of US dollar and Euro. In addition, internal inspection considers as the key tasks of supremacy and declaration purpose within the company named as Bega Cheese. It is position of the internal assessor for providing self-governing and purpose declaration in the sufficiency and competence of Bega Cheese agreement for risk management, power and internal activities. It is necessary for the examiner for recommending that will help in improving the efficiency as well as competence of scheme and procedure (Hardy 2014).
  • Bega Cheese is a company that is committed towards maintaining higher standards from corporate governance arrangements that concerns with accountability and transparency. It administers with the behavior of actions for the operational aspects of Bega Cheese. Bega Cheese Board had accepted corporate governance and practices that is reliable with sustained expansion and achievement at the same time. These actions taken will help Bega Cheese for constant improvement of actions for values (Green and Taylor 2013).
  • Bega Cheese is a company that that involves in strategies and in diversity and inclusive strategy through attainment of competitive advantage. The company uses strategy that endures assurance for leaders who improves on thinking by working in a diverse work environment (Ge, Simnett and Zhou 2016).
  • Bega Cheese engages in making innovative strategies that can gain over acceptable development for achieving assortment approach objectives. Addition to that, the management team of Bega Cheese comprises of women that had increased from 23% to 26% from the past years (Gay and Simnett 2015).
  • Audit and Risk Committee mainly comprises of Independent Director who are responsible for undertaking process of fiscal treatment as well as internal control and non-financial risk administration at the time of conducting external audit (Crockett and Ali 2015).
  • The members of Audit and Risk Committee for the company named as Bega Cheese engage ways for checking the fulfillment with laws and system in its own strategy. Addition to that, the business needs to maintain positive association with the external auditor that is self-governing by nature. It is essential for the company to evaluate the adequacy of process and control for finding proper ways in identifying and managing over the potential risk areas in certain way (Cohen and Simnett 2014).

Bega Cheese is bringing Vegemite home after buying it as well as Australia and New Zealand arm of US-based global food giant named as Mondelez International. The five factors are mentioned as under:

  • The acquisition with Vegemite and Kraft brands with Bega Cheese will help in using near-term corporate opportunities for paying down the debt (Carey 2015). The transactions with non-controlling interests that reserves that evidence gains or losses for fair value actions on savings that is classified under listed equities. There is difference in pledge for the acquisition of Property, Plant and Equipment. The attainment technique of secretarial is used to explaining for all trade grouping, despite of whether fairness instruments or other possessions are obtained. Furthermore, the deliberation transferred for the attainment of a supplementary includes the fair values of the possessions transferred, the liabilities incurred and the justice interests issued by the company. Therefore, the deliberation transferred also comprises the fair value of any dependent contemplation agreement and the fair value of any pre-existing fairness interest in the supplementary (Botica?Redmayne 2013).
  • The acquisition with the brands will be value accretive in its own right that is strategically essential as well as company making (Arens et al. 2016). The acquisition method of secretarial that is used for account for trade combination within the company. The interest in the joint venture speculation is accounted for using the fairness technique at the time of recognition at cost. It is necessary to use equity method of accounting where allocate of post-acquisition of profits or losses in the comprehensive profits.
  • Bega Cheese Audit Committee is of the opinion that Kraft license will be royalty free till December 2017 where it acts as transitional arrangements. Addition to that, Bega Cheese will also produce the Dairylea and Snackabout brands under the license for the countries such as Australia and New Zealand. Acquisition-related expenses are expensed as acquired. In addition, particular possessions obtain and accountability and dependent liabilities unspecified in a trade grouping are, with incomplete exceptions, deliberate originally at their fair values at the attainment date. Therefore, on an acquisition-by-acquisition foundation, Bega Cheese distinguishes any non-controlling attention in the attained either at fair value or at the non-controlling interests balanced allocates of the acquirer’s net particular possessions (Ge, Simnett and Zhou 2016).
  • Acquisition greatly affect the audit plan of Bega Cheese for the year 2017 where some processed cheese products for Kraft funds for the acquisition from bank debt. Economic sustainability risks for Bega Cheese are sustainably by controlling the market share as well as proper brand management. It help in facilitating growth by use of appropriate acquisition with proper fiscal management as well as anticipating towards changes in domestic and overseas where markets operates.
  • Loans and receivables are originally documented at fair value plus business expenses that are straight attributable to the attainment of the fiscal benefit. Addition to that, they are then carried at amortized price by the effectual attention technique. Therefore, they are derecognized where the rights to collect cash flows from them have terminated or have been relocate as well as business has relocating considerably all the risks and rewards of possession (Varughese, Janda and Obermair 2014).
  • It is important to understand the fact that dairy commodity markets faced challenges for dairy companies during the financial year 2016 where there was strong demand for infant formula and growing up milk powders (Ge, Simnett and Zhou 2016). Addition to that, Australia knowledgeable a main increase in demand for infant formula, pursue on and toddler products. Further, the demand gets benefits from business and led to significant proposal in the dietary platform counting escalating the ability portion to long term purchaser Bellamy’s and forming Bemore, a joint process with Blackmores, for the growth of life stage dietary products beginning with infant formula, track on and toddler products with Bega Cheese Group and Blackmores distribution evenly in the administration, advertising, promotion and allocation of co-branded Blackmores or Tatura infant as well as dairy based food products.
  • The Bemore joint process is an outstanding instance of two companies distinguishing that their potency could be shared to generate worth (Varughese, Janda and Obermair 2014). Addition to that, Blackmores with their proper presentation in the Asian markets, outstanding product acknowledgment in the health space in countries such as Australia and globally and a important follow evidence in structure brands and customer trust mutual completely with Tatura Milk Industries’ over 20 years of knowledge producing infant formula and mounting up milk powders. Nevertheless, long history of Tatura’s and comprehensive information of infant formula products and the capability to foundation high excellence sustainably produced milk from our dairy farmers look at the Bemore joint process exclusively situated to generate Australian shaped formula for babies and toddlers for the countries such as Australia.
  • In the year 2015, Bega Cheese proclaimed the arrangement of a joint action with Blackmores when the Bega Cheese and Blackmores share always in the brand name, support, encouragement and allocation of documented infant and nutritionals method in the home as well as export market (Varughese, Janda and Obermair 2014).
  • The company recognized a coalition with Blackmores during the configuration of the Bemore joint process, with Blackmores and Bega Cheese Group allocation equally in supervision the infant formula and life phase nutritionals trade and the benefits and risks of the trade (Ge, Simnett and Zhou 2016).
  • The primary purpose of Bemore is to equally symbolize Bega Cheese and Blackmores in advertising, promotion and distributing ended infant nutritional powders as well as life phase dairy based nutritional powders for the countries such as Australia and Asia. Addition to that, Tatura Milk produces and provisions nutritional powders to Bemore on usual profitable conditions. Furthermore, Blackmores provides advertising, promotion and allocation services to Bemore on usual profitable terms. Therefore, Blackmores acts as manager for Bemore in the trade of dietary powders, operational with Blackmores’ household and global clientele (Varughese, Janda and Obermair 2014).

Reference List

Arens, A.A., Best, P., Shailer, G., Fiedler, B., Elder, R.J. and Beasley, M., 2016. Auditing and assurance services in Australia: an integrated approach. Pearson Education Australia.

Botica?Redmayne, N., 2013. Auditing and Assurance Services in Australia: An Integrated Approach. Pacific Accounting Review.

Carey, P.J., 2015. External accountants’ business advice and SME performance. Pacific Accounting Review, 27(2), pp.166-188.

Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda. Auditing: A Journal of Practice & Theory, 34(1), pp.59-74.

Crockett, M. and Ali, M.J., 2015. Auditor independence and accounting conservatism: Evidence from Australia following the corporate law economic reform program. International Journal of Accounting & Information Management, 23(1), pp.80-104.

Gay, G.E. and Simnett, R., 2015. Auditing and assurance services in Australia. Sydney: Mcgraw-hill.

Ge, Q., Simnett, R. and Zhou, S., 2016. Ethical and Quality Control Requirements When Undertaking Assurance Engagements.

Green, W. and Taylor, S., 2013. Factors that influence perceptions of greenhouse gas assurance provider quality. International Journal of Auditing, 17(3), pp.288-307.

Hardy, C.A., 2014. The messy matters of continuous assurance: Findings from exploratory research in Australia. Journal of Information Systems, 28(2), pp.357-377.

Hay, D., 2015. The frontiers of auditing research. Meditari Accountancy Research, 23(2), pp.158-174.

Hay, D., Stewart, J. and Botica Redmayne, N., 2016. The Role of Auditing in Corporate Governance in Australia and New Zealand: A Research Synthesis.

Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: a historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.

Knechel, W.R. and Salterio, S.E., 2016. Auditing: assurance and risk. Routledge.

McKee, D., 2015. New external audit report standards are game changing. Governance Directions, 67(4), p.222.

Moroney, R. and Trotman, K.T., 2015. Differences in Auditors' Materiality Assessments When Auditing Financial Statements and Sustainability Reports. Contemporary Accounting Research.

Moroney, R., Campbell, F., Hamilton, J. and Warren, V., 2014. Auditing: A Practical Approach. Wiley Global Education.

Redmayne, N.B., 2013. Auditing and Assurance Services and Ethics in Australia: An Integrated Approach. Journal of Accounting & Organizational Change.

Seguí?Mas, E., Bollas?Araya, H.M. and Polo?Garrido, F., 2015. Sustainability assurance on the biggest cooperatives of the world: an analysis of their adoption and quality. Annals of Public and Cooperative Economics, 86(2), pp.363-383.

Shen, H., Wu, H. and Chand, P., 2017. The impact of corporate social responsibility assurance on investor decisions: Chinese evidence. International Journal of Auditing.

Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research add value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.

Simnett, R., Carson, E. and Vanstraelen, A., 2016. International Archival Auditing and Assurance Research: Trends, Methodological Issues, and Opportunities. Auditing: A Journal of Practice & Theory, 35(3), pp.1-32.

Simnett, R., Zhou, S. and Hoang, H., 2016. Assurance and other credibility enhancing mechanisms for integrated reporting. In Integrated Reporting (pp. 269-286). Palgrave Macmillan UK.

Soh, D.S. and Martinov-Bennie, N., 2015. Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting. Managerial Auditing Journal, 30(1), pp.80-111.

Varughese, E., Janda, M. and Obermair, A., 2014. Can the use of quality assurance tools reduce the impact of surgical complications on the well?being of obstetricians and gynaecologists in Australia and New Zealand?. Australian and New Zealand Journal of Obstetrics and Gynaecology, 54(1), pp.30-35.

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