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Part 1 Understanding Nature of the entity
Matters that you may consider when obtaining an understanding of the nature of the entity include:
 Business operations 
 Investments and investment activities 
 Financing and financing activities 
 Financial reporting practices 
Part 2 - Understanding the Industry
a) Industry size
b) Industry growth
c) Industry supply chain
d) Major players
e) Market shares of Industry players
f) Critical success factors
g) Major threats
Part 3 Understanding the legal environment
Relevant regulatory factors include the regulatory environment. The regulatory environment encompasses, among other matters, the applicable financial reporting framework and the legal and political environment.

Industry overview

The TPG Telecom Company is an Australian listed company that provides mobile and internet related services. It is the second largest internet provider company in Australia and has its own mobile virtual network model. As per the annual reports of the company, the company has been doing extremely well from the last five years and has been showing tremendous growth. The same is expected to continue in the future. It has also entered into many cross boarder deals that have helped it to widen its operations not only in Australia but overseas also. It is trying it best to tap in the international market through its broad data network and services. Apart from providing high speed internet the company also provides wide variety of NBN services that are supported by its network of reputed brand that supports its wide customer base in the country and overseas. It has many subsidiaries that provides bundle of services under the TPG network to the general public at large. The company contributes its overall success to its large number of hardworking employees. The human resource team of the management is the strongest (Sweeting 2017).

As per the annual report of the company, the major investing activities of the company compromises of acquisition of intangibles, acquisition of plant and property, the changes in the fair value is also considered in the case of investing activities of the company. The major financing activities includes, share issue cost, interest amount paid, payment of the financial leases.

The consolidated statements of the company are prepared by the AASB framework of accounting. The statements of the company have been prepared as per the IFRS framework and the same has been complied very accurately by the company. In case of the consolidated financial statements the same has been prepared on the basis of historical cost, except the all over assets and the liabilities that have been valued on the basis of the fair value. The note of accounts gives proper disclosure in relation to all the details that the company has stated in its financial reports. The company is doing very well with large scale expansion and development being on the helm of everything (Grenier 2017).

The telecom market today is headed by the essence of digital marketing in this era of internet and digitalization. The industry today is all about sharing developing and generating strong data transfer with the help of the combination of ICT. This development requires full integration of the latest elements of technology that includes high speed data, cloud usage and data transfer over the same. This has opened new avenues in the telecom market. The main element of success in this field is data analytics and that has been very much incorporated in the company that is given. The industry is mostly driven by the ongoing innovations and technological updates that are governing the flow of information in the economy. Since last twenty years there has been much development in this entity and that now has achieved very high pace and that is reflected in the overall growth that the industry is witnessing.

Critical Success Factors and Major Threats

As per reports the average revenue from the telecommunication sector is $40 billion in 2016, that has witnessed an overall growth of 2.0%. The market is presumed to grow strongly in the years to come, with the major players being the Telstra, Vodafone and Optus. The major market share is in the hands of Telstra, but recently these top companies are facing threats from the second tier market. In that level of the market there is a lot of flexibility that allows easy entry and the new players that are entering are experimenting with the content that they are providing to the customers (DeZoort & Harrison 2016).

The critical success factors that governs this type of industry is the how much innovation is the company ready to bring in its operation and also at what speed are they providing the customers. Speed and innovation governs this type of industry. There are a bundle of services that the company can provide like the mobile services, the telecom services, the other data services. The major threat that governs this type of industry is the easy entry and exit opportunity. Many small operators are present in the tier two levels that provide data transmission services at very low prices to the customers. The consumers are reluctant to pay high prices to the companies and the provision of fixed line and free mobile services has pacified the people to get in to this business. All this have led to an increase in the overall competition for the companies.  The company also faces the risk of security because it is a cloud based model and the companies do fear that may lose on the important data and details. Hence there must be utmost protection of the data that is transmitted and in order to provide these services, these people have to spend a large amount of money and hence the overall cost of operation might increase. Therefore data protection must be there and proper measures must be taken by the companies at large. The technological reach of these services have improved a lot over the years, this has also led to more businesses for the operators who are entering this business. As for the TPG Telecom Company, the company is doing fairly well, but there is very strong competition in the market and that is not at all favorable for the company at large. Thus is important for the company to improve its overall area of business so that the overall market share improves and for the same the company is opting for domestic as well as international expansion in the coming years (Das 2017).

Legal and Regulatory Factors

The legal environment that is present in this type of industrial sector includes a large number of rules and regulations that the company requires to follow. The books of the company must be prepared as per the applicable reporting framework and all the relevant disclosures must be given in accordance with the same. If there are any loopholes, then the management of the company can be held liable for the same. It is important that all the legalities that are set by the government in relation to the transfer of data and use of the communication lines must be followed by the company. All the relevant rules and regulations must be followed, and in case of any deviation appropriate penalties might be charged that may hamper the growth of the company. The legal environment in relation to the same in Australia is very flexible, where importance is given more to the substance then what is the overall form that is affecting the economy.

The PEST analysis refers to an analysis of the overall economic social and political external environment that affects the overall growth of the company.

Political Factors

The political environment is very risky and is filled with a lot of regulations, network licensing, national radio spectrums and in case of certain nations trade barriers. The low level service providers feel the effect less but the top companies are affected by all this unrest. The only political factors that are in the favor of the company are privatization and deregulation. This has led to development of a large number of top companies in the country. The major factors that govern political risks include government intervention and issues related to the human rights (Chariri 2017).

Economic Factors

The major economic factor that governs such telecom company includes recession. Because of that people were spending less on their telecom expenses. However since few years, there has been a growth on the telecom services and that is supporting the growth of these companies. The changes in overall economic trend are also supported by the changes in the overall technology. As there are very few trade barriers which means that the overall development will be more as entry and exit has become easy.

Social Factors

The few social factors that affect the growth of these type of industries includes connectivity between what is spend and what is enjoyed. People are ready to spend on the telecom services because the usage of internet has increased in this fast pace world. This is indirectly affecting the overall growth of the economy. If people become more dependant on their cell phones, they will spend more and by that the business will improve (Abbott et al. 2016).

PEST Analysis

Technological Factor

There are various technological factors that affect this type of industry. Technology is the main guiding element. The overall innovations that the companies do with the level of technology that they can afford, often directs their overall sale and development. Hence technology plays a very important role in the overall telecommunication business. It is the soul over which the business is working.

The probable strengths of the company includes that the company is expanding its services and its area of operation as it is also going international. This main strength of the company lies in its strong work force that works excellently supporting the various branded resources that the company is connected to, In order to provide the best services to the customers. It provides the best services at the cheapest price possible and that governs the overall business of the company (Werner 2017).

The weakness lies in the fact that the company is now expanding but the major market share is I the hands of other big companies like Telstra , Vodafone etc that. Thus the major market being already covered it will be difficult for the company to expand. Also the deficiencies in the operational overview of the company also contribute to the loss that the company might face in the coming future years (Jones 2017).

With wide scale growth in the overall use of the internet and related services all over the world, the demand for cheap data services has increased and it is important that the companies around the world can tap in the same by providing the best services at the cheapest cost. So these are the few opportunities that exist for the TPG Company (Knechel & Salterio 2016).

The major threats are that of strong competitors. And also since the market is very flexible, it provides easy entry and exit opportunities, at second level. This might affect the overall growth and development of the company in a negative manner.

The porter five forces analysis deals with the competition rivalry that is present in the market. We see that in case of the telecom sector there are a lot of competitors and that might affect the growth of the company. There is also threat of new entrants as it is easy to enter and exit the industry. With large scale innovation taking place, it is also very easy for the companies to bring in substitutes and the customers will only go for those that provide them better services at cheap prices. The industry is affected by the overall consumer buying power because if the consumer reduces his expenditure on telecom services the business will not progress. On the supplier side, the related cost that affects the overall growth is the one related with the security services that the company needs to provide and also the cost of the various research and development that the company needs to undertake (Muller, Ward & Moodley 2017).

The other external factors that might affect the overall health of the company is the approach of the management to the present situation of technological changes and updating. If the companies does not indulges in the same the company won’t be able to progress, as customers will only choose those companies that provide them best services at the cheapest rate possible. All the other external factors that might affect the overall economy has been provided and discussed above.

While conducting the audit there are three types of risk that an auditor faces. Inherent risk is the type of risk that is present in the economy even though the management has installed proper controls in the system. Detection risk is the type of risk that is present in the economy when the auditor fails to identify major issues or errors in the financial statements. The third types of risks are the control risks that occur if the management fails to install proper control system in the economy. The main work of the auditor of the company is to identify these risks and take important step to mitigate the same. The main work of the management is to support the management by providing them with all the important details that they might need to conduct their audit smoothly. Risk identification and mitigation is an integral part of the overall auditing (Fay & Negangard 2017).

  1. Industry development: A potential risk refers to the easy entry and exit in the industry that is threat to the developed companies, as they provide same services at low prices.
  2. New Product and Development: A potential risk that exists with the development in the new technological avenues that might affect the overall operations of the company, as better technology leads to better services.
  3. Expansion of the business: The market is already saturated with top companies like Telstra and Vodafone and hence the company will find it very difficult to expand in those circumstances.
  4. New accounting requirements : There have been continuous changes in the overall method of accounting and the accounting procedures that the company follows, all new changes to the accounting standards is occurring every now and then.
  5. Regulatory requirements: In case of the telecom sector, the businesses have to comprehend with a lot of regulations failing which there might be certain legal actions against them.
  6. The major issues related with the current requirements are in their implementations that many companies find very difficult to do owning to their flexible operations and business policies.
  7. The Use of IT is a matter of potential threat to the company because the company needs to maintain the highest level of security for the customer’s data. This is where the need for better IT practices seeps in.
  8. In case new strategies are implemented without any research and reconciliation by the management that might lead to inherited business risks in the company and effects its overall operations. Hence it is necessary to be sure before taking any steps in case of new methods .

After the analyses of the ratios of both the companies we can state that in case of TPG, the return on capital and return on assets is stable that shows that the company is earning profits and the shareholders return is good as the return on equity is increasing. The gross profit margin and the net profit margin ratios are almost stable this shows that the company is improving. The current ratio and the quick ratios have decreased that shows that the overall liquidity position of the company have worsened and the liquidity position is not favorable. In case of Telstra we see that return on assets, return on equity all have reduced that shows that the company is not performing well. The gross profit ratio, the current ratio and the liquidity ratios are much better than TGP that shows that the company having strong internal control measures. Also the company is taking advantage of its trading on equity and hence it is also the master leader in the Australian economy (Maynard 2017).

It is important that the auditor tries to mitigate the basic risks that it sees in the company by taking the help of the management. Effective communication with those charged with governance is very important for the overall development. Proper systems must be designed and implemented that will help in understanding the basics ethical values of the company. Proper training must be provided to the employees and the staff. It is important that certain matters that require extra attention expert opinion must be taken that can help the management in taking important and correct decisions. These people must be free of any biasness and must have the requisite expertise in those particular areas so that they can help the management. The management must also be trained accordingly to adopt such levels of training that will help them in getting the best results out of their employees. The organizational structure should be supportive enough of the actions of the management and also the goals of the company. In case of TPG, it is important that more flexibility must be there such that innovation can be imbibed in the system and proper training must be provided to the staff and the employees. Also when it comes to recruiting talent, focus should be given on development and nourishment of talent that will help in the growth of the company (Chariri 2017).

Conclusion

After the entire analysis we can say that the company is in a very favorable position, however if it wants to improve its area of operation it should take certain factors into consideration. That will help in the development of the company, and provide them with the exposure that they need. Overall the performance of the company is very satisfactory given it has so much of competition in the market still it is maintaining its level of growth in the economy. That is the best thing about the company along with its strong work force that works for its betterment (Venezia 2017).

Abbott, LJ, Daugherty, B, Parker, S & Peters, GF 2016, 'INTERNAL AUDIT QUALITY AND FINANCIAL REPORTING QUALITY: THE JOINT IMPORTANCE OF INDEPENDENCE AND COMPETENCE', Journal of Accounting Research, vol 54, no. 1, pp. 3-40.

Chariri, A 2017, 'FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING WITHIN INSTITUTIONAL FRAMEWORK', Journal of Economics, Business and Accountancy, vol 14, no. 1.

Das, PK 2017, 'Financing Pattern and Utilization of Fixed Assets - A Study', Asian Journal of Social Science Studies, vol 2, no. 2, pp. 10-17.

DeZoort, FT & Harrison, PD 2016, 'Understanding Auditors sense of Responsibility for detecting fraud within organization', Journal of Business Ethics, pp. 1-18.

Fay, R & Negangard, EM 2017, 'Manual journal entry testing : Data analytics and the risk of fraud', Journal of Accounting Education, vol 38, pp. 37-49.

Grenier, J 2017, 'Encouraging Professional Skepticism in the Industry Specialization Era', Journal of Business Ethics, vol 142, no. 2, pp. 241-256.

Jones, P 2017, Statistical Sampling and Risk Analysis in Auditing, Routledge, NY.

Knechel, WB & Salterio, SE 2016, Auditing:Assurance and Risk, 4th edn, Routledge, New York.

Maynard, J 2017, Financial accounting reporting and analysis, 2nd edn, Oxford University Press, United Kingdom.

Muller, C, Ward, M & Moodley, T 2017, 'The relationship between the management of payables and the return to investors', Journal South African Journal of Accounting Research, vol 31, no. 1, pp. 35-43.

Sweeting, P 2017, Financial Enterprise Risk Management, 2nd edn, Cambridge University Press, UK.

Venezia, I 2017, Behavioral Finance: 'Where Do Investors'' Biases Come From?', WORLD SCIENTIFIC, Singapore.

Werner, M 2017, 'Financial process mining - Accounting data structure dependent control flow inference', International Journal of Accounting Information Systems, vol 25, pp. 57-80.

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