Question 1 As a part of credit analysis, you want to evaluate the financial statement of...

Question 1 As a part of credit analysis, you want to evaluate the financial statement of AusGroup Limited and Woolworth Limited for the year 2018. Before starting financial statement analysis, you need to go through the audit report of the companies. Based on your own reading and analysis of audit opinion, is it worthwhile to evaluate financial statements of the above companies? Justify your opinion. [2+2 = 4 marks] [Check Blackboard assessment folder for a copy of the annual reports].

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AusGroup Limited - Here the Auditors are unable to comment whether the statements show a true and fair view due to unverified assumptions for derviving disposal value and non-evaluation of the fair value of the investment in subsidiaries

These comments by the auditors might be a result of some fraudulent representation by the management but that cannot be proved. Hence, we may have to evaluate the financial statement but the outcome from analysis might not be given any weight to our conclusion.

Woolworth Limited - Contradicting the above, the auditor has given a clean chit in terms of true and fair representation of financial statements. It shows how a good management show in terms of proper preparation of financial statements. So it will be very useful to evaluate Woolworth for credit analysis

jeff jeffy answered 1 year ago

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