Auditing And Financial Analysis Of New Hope Corporation Limited

Concept of Materiality in Auditing

Auditing is the process of conducting the official financial inspection for the firm to understand the financial condition of the firm. For performing the auditing the organisation New Hope Corporation Limited is being selected. The organisation was founded in the year 1952 and on 2003 they were listed on the ASX Company. The paper will focus on the analysis of the financial and annual report of the firm to understand the auditing process and the financial condition of the firm within the market.

Determination of the level of materiality 

Materiality is the primary concept within the process of auditing to the importance of the amount than the transaction within the annual report. The level of materiality that could be utilized for the analysis of the group annual report of the firm is considered to be ISA 200 (Pucheta?Martínez, & García?Meca, 2014). This is generally utilized for providing the view on the development process of financial statement with the help of proper material aspect. It also shows that misstatements are generally considered as the material if it could reasonably be expected in influencing the economic decision of the users that are usually taken on behalf of the financial statement. The fact is clear that the concept of materiality is the fundamental activity for the auditing process. During the planning stage the materiality is being set as the whole (Bepari, & Mollik, 2016). This is due to the fact that New Hope Corporation Limited annual report auditing process needs to be performed in the term of materiality to understand that if the financial reporting is free from material misstatement. 

In the determination of overall materiality in the annual report of NHC help the auditor for understanding the misstatement within the report. The balance sheet along with the income statement and the profit and loss of the firm clearly provides the effective view on the materiality of the organisation. These are the material that is being utilized within the auditing process for providing effective analysis and auditing for the annual report of the firm (Gaynor, Kelton, Mercer, & Yohn, 2016). The quantitative estimate of the materiality for New Hope Corporation limited are the balance sheet and the income statement of the firm along with their profit and loss statement. The amount of transaction related to the business process and other activity provides effective materiality for auditing within the organisation.

Annual report draft and disclosure review

Analysis of New Hope Corporation Limited’s Financial Health

The annual report of NHC provides the effective disclosure in the term of insurance policy that is performed for the insurance of liability of the firm. The liability insurance is performed against and the amount of the premium. The annual report also provides the view that other immaterial coal mining as well as the related operation which does not need the threshold generally required separate disclosure in the AASB 8 operating system (Abbott, Daugherty, Parker, & Peters, 2016). It can be seen from the disclosure that the sales within the segment are performed out at the support length and also they are eliminated on the consolidation. From the annual report, it can be also seen that the fair value estimation is the financial tools that are used to determine the valuation techniques.

The draft of this report is clearly shown within the balance sheet of the firm where it provides an effective view on the forward exchange. It can be seen that the fair value of the financial statement is based on the quoted market price that also at the reporting date. In this case of NHC, the quoted market price is considered to be 3.364 million dollars on the equity security. The remuneration disclosure of the company also provides the view on their wages and their compensation factor for the staff members (Darmadi, 2016). The performance of the stakeholders along with the executives are verified in the most effective way to provide valuable remuneration policy for the firm. Auditing is the most effective process for analysing the performance level of the firm and for this process, the existence testing along with the valuation testing is highly effective. 

New Hope Corporation Limited is having the effective and valuable working function regarding their assets and their liabilities. It can be seen that the year 2015 in the term of the asset was better as compared to that of 2016. The fact is clear that for the year 2015 the current asset was 1,166,178 whereas, for the year 2016 it was 231,849. In the case of a non-current asset, the organisation has a higher value for the year 2016 as compared to 2015. The total asset of the firm in 2016 was 2,018,549 and for the year 2015, it was 2,075,158 (New Hope Corporation Limited, 2018). The difference can clearly understand that the asset of NHC has decreased over the year. It is clear that in the year 2017 again the value of asset increased within the firm where the total asset was 2,181,645. Total equity of the firm for the year 2015, 2015 and 2017 are 1,852,625, 1750412 and 1853428 respectively (Salehi, & Shirazi, 2016). It clearly provides the view that the financial health of the firm for the year 2015 was quite good and they faced profit in the firm. In the year 2016, their financial health decreased as compared to that with the previous year.

Impact of Non-Regular Items on Net Profits

The financial health of the firm again increased in the year 2017 which clearly show they retain profit to be 1721118 and their total equity to be 1853428. The balance sheet and the financial health of the firm clearly show that the company faces a profit of 56735 for the year 2015 but in the year 2016 they faced the loss of 69378. The organization has to travel through a huge transformation for the year 2017 to make change within the amount for gaining profit (Dumay, 2016). For the year 2017, the profit was 3670 which indicates the slow growth of the company after they faced a loss for the financial year of 2016. The analysis of profit and loss statement of the company show that for the year 2015 and 2016 the organisation faced the total comprehensive loss of 42431 and 35834 respectively. The year 2017 is quite positive and good for the company as compared to that of the previous year (Nguyen, & Truong, 2017). This is due to the facts that in the year 2017 the organisation has the total comprehensive income or the profit of 152555. The deeds of cross guarantee provide the effective view of the consolidated statement of the comprehensive income.

The organisation NHC is having the suitable and valuable position within the market in term of their profit and loss for the years 2015, 2016 and 2017. For example; the consolidated statement of the comprehensive income shows that the organisation faced the profit after the income tax for the year 2015 which was 60265. On the other hand for the year 2016 the company faced the loss of 85882 after the calculation of income tax. Again for the year 2017, the organisation has faced profit of 79436 calculation after income tax for the year (Annual report NHC, 2018). For the year 2015 the changes in the fair value regarding the cash flow hedges is considered to be in loss of 33790 but for the year 2016, it is in the profit of 2455 for the firm. This is the fact that the business has the increased value for the development of working function within the field. In the year 2017 again they face loss for the fair value of cash flow hedges of 4031 which indicates the ups and downs of the company for the years (Shimeld, Williams, & Shimeld, 2017). The balance sheet and the profit and loss statement show that the New Hope Corporation limited is having a quite improvised working function within the market.

Conclusion

Cash flow statement review

The cash flow statement of the company shows that the organisation is having the valuable aspect in term of the business and provides the view on the health of the company. It can be seen that net cash inflow within the firm for the year 2017 was from operating activities. The net cash flow of this activity was 284531. On the other hand, the greatest outflow of the net cash from the company is regarding the process of investing activity and the financing activity. For the investing activity, it can be seen that net cash outflow was 79101 and for the financing activity the amount is 52136 (Sethi, Martell, & Demir, 2017). The primary cash receipt along with the cash payment for the year 2017 was considered as the receipt from the customers that involve GST and the amount was 914625. 

The payment performed by the firm in the year 2017 is done for the suppliers and also to the employees which even involve the GST and the amount of payment was 601621 (Pearson, 2014). The organisation performed various non-cash financial as well as the investing activities that imply on the financial health and the cash flow of the firm. The non-cash investing activity within the organisation for the year 2017 is paid for the property, then the payment for the intangible assets along with the dividend received then the payment for the acquisition of the business (Home | New Hope Group, 2018). The activity that is being performed by the firm in term of financing is the repayment of finance leases and the dividends payment which depicts the amount of 52136 as the cash outflow from the financing activities. Audit planning is the best process for the identification of risk that is being associated with the company in their cash flow statement. This is one of the best and the effective way for the improvement of risk associated within the firm.

Review of the audit report of the 2017 financial report

The organisation New Hope Corporation Limited financial report for the year 2017 share the view that the firm faced a net profit after the tax as well as before the non-regular items of around 128.7 million dollars. The financial report of NHC also provides the view that the revenue of the firm was 844.1 million dollar that is almost 59% more than the revenue of the financial year 2016 (Christ, Masli, Sharp, & Wood, 2015). The cash generating of the firm remains strong with the EBITDA of around 283.1 million dollar that is almost 248% more than the previous year. It can be also seen that the company produce the positive cash operating surplus that is of the amount of 313 million dollars that also before the tax and the interest. 

The total non-regular goods after the tax resulted within the net increase of the group tax is considered to be the amount of 11.9 million dollars. The production of the company for the year 2017 was almost 8.6 million tons of the saleable coal which is the increment of around 30% from the year 2016 (Basu, Hicks, Krivokapic-Skoko, & Sherley, 2015). The company also performed the total amount of coal sale for the year 2017 was 8.5 million tons and it is much more than the 6.9 million tons of coal sale that were performed within the year 2016. The financial condition of the company for the year 2017 was much favourable as compared that with the previous years. The annual report did not face ant type of issues that are directly impacting the delivery of financial report for the company. The organization is providing the healthiest financial condition for the company in the year 2017.

Conclusion 

The paper eventually concludes the fact that the organisation NHC have the profit for the year 2017 and also for the year 2015. The paper also concludes the fact that for the year 2016 the organisation did not face profit and for that their sales and their investors face a huge drawback within the market. In the year 2017, they again have the profit in their sales and the working function within the market. The balance sheet along with the cash flow statement and the income statement clearly shows the improvement process of the firm within the market. The financial report of NHC for the year 2017 show that the organisation is having a positive and high growth rate within the market. 

References 

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Annual report NHC, (2018). Asx.com.au. Retrieved 31 August 2018, from https://www.asx.com.au/asx/share-price-research/company/NHC 

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Home | New Hope Group. (2018). Newhopegroup.com.au. Retrieved 31 August 2018, from https://www.newhopegroup.com.au/ 

New Hope Corporation Limited, (2018). Newhopegroup.com.au. Retrieved 31 August 2018, from https://www.newhopegroup.com.au/files/files/2017%20Annual%20Report.pdf 

Nguyen, N. N. H., & Truong, T. P. (2017). Regulatory enforcement, financial reporting quality, and investment efficiency: a pitch. Accounting Research Journal, 30(01), 12-18.

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