auditing case study--Virgin Australia
Executive Summary
This report analyses Virgin Australia (ASX code VAH) and identifies its potential business and audit risks that will need to be addressed in the 2014 audit. It is presented to the Virgin Australia Audit Committee as part of the 2014 Audit planning process.
The first part of this report provides a broad introduction into the business of Virgin Australian by examining its principal sources of revenue, its nature of operating, its competitors, the market share and the regulations affecting its operations. From this, it can be seen that Virgin Australia operates in a very competitive environment and generates revenue by the core business of passenger and cargo transport.
The second part of this report analyses the external business environment which the civil aviation industry operates in and its specific impacts on VAH by using a PESTEL model consisting political, economic, socio-cultural, technological, environmental and legal which are macro environment factors affect strategic business planning.
Three major audit risks are identified and assessed in the third part of the report. These relate to revenue and income accounts， the PPE and intangible assets. The accuracy of revenue and income may be questionable due to of unearned passenger revenue obligations and future obligations in relation to credit voucher redemption rates. The PPE account is possibly overstated as it is hard to predict the next scheduled heavy maintenance especially for the new aircraft model and value of the leasehold properties are easily to be overstated. Finally the intangible asset account can be overstated, which is indicated by the the difficulty of the valuation of Sabre Sonic software and fair value of goodwill.
1. Information of Virgin Australia
1.1 Sources of revenue
Virgin Australia Airlines is part of the Virgin Group which was established in 1970 by Sir Richard Branson. It is Australia's second-largest airline bases in Bowen Hills, Brisbane.
Virgin
This report analyses Virgin Australia (ASX code VAH) and identifies its potential business and audit risks that will need to be addressed in the 2014 audit. It is presented to the Virgin Australia Audit Committee as part of the 2014 Audit planning process.
The first part of this report provides a broad introduction into the business of Virgin Australian by examining its principal sources of revenue, its nature of operating, its competitors, the market share and the regulations affecting its operations. From this, it can be seen that Virgin Australia operates in a very competitive environment and generates revenue by the core business of passenger and cargo transport.
The second part of this report analyses the external business environment which the civil aviation industry operates in and its specific impacts on VAH by using a PESTEL model consisting political, economic, socio-cultural, technological, environmental and legal which are macro environment factors affect strategic business planning.
Three major audit risks are identified and assessed in the third part of the report. These relate to revenue and income accounts， the PPE and intangible assets. The accuracy of revenue and income may be questionable due to of unearned passenger revenue obligations and future obligations in relation to credit voucher redemption rates. The PPE account is possibly overstated as it is hard to predict the next scheduled heavy maintenance especially for the new aircraft model and value of the leasehold properties are easily to be overstated. Finally the intangible asset account can be overstated, which is indicated by the the difficulty of the valuation of Sabre Sonic software and fair value of goodwill.
1. Information of Virgin Australia
1.1 Sources of revenue
Virgin Australia Airlines is part of the Virgin Group which was established in 1970 by Sir Richard Branson. It is Australia's second-largest airline bases in Bowen Hills, Brisbane.
Virgin