Inherent risks
1) Cost of fuel and exchange rate fluctuations
An aviation industry such as Qantas tends to experience high fuel cost from past few years. This is considered a norm for a service industry to have this particular risk and in addition, Qantas is also facing losses due to exchange rate fluctuations as the organization is buying its fuel in US dollars. These risks consists of the following balance related objective, “Accuracy and completeness”.
Financial misstatement
According to analysts, an airline’s costs are typically equivalent to about 95 per cent of its revenue. The cost of fuel indirectly adds pressure in the revenue of a company where this could add risk for manipulation in the balance sheet .The following risk can be misstated by manipulating the revenue of the financial statement to reduce the burden of fuel and price rate fluctuations. This particular risk could be an incentive for a company to adjust the profit of the organization by manipulating sales, which reflects to Qantas case as the organization could increase sale volumes of the tickets fares to hide significant losses. In addition, Qantas reported the company is incurring 245 mill of losses in the current period due to surging fuel price, as this could be a scheme to understate its earnings as a tax evasion scheme where it could deliberate act as less income to gain tax benefits. The airline is buying its fuel in US dollar resulting in a severe loss in the foreign exchange market. This could rise to the manipulation of the share of losses from one category to another easily as both items are genuinely soared up for all the economy causing declining profits.
Evidence of misstatement
Qantas is expected to increase fuel surcharges on its internat...
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...ill lead to final evidence, where results are examined and audit report is issued (Elder, Beasley and Areans, 2008, p. 57-889).
Conclusion
We have analyzed the inherent risks and control risks of Qantas airways for the year 2011 and we have reached to a conclusion that Qantas may likely to misstate its financial results fin terms of competition, industrial strikes, higher fuel prices, technological failures, increased debt burden, lower credit rating, and reputational risk for the year 2012, mainly because of reputational risk and strong competition prevailing in the market. Auditors may find plenty of information from the financial results to evaluate the misstatement of financial results. Although if proper control plans are implemented and top management focus on developing strategies that affects the growth and profitability factors.
The purpose of this report is to show how Qantas was affected by global financial crisis. Qantas is the second oldest airlines in the world. It is one of the tough competitors for other airlines. But Qantas was affected badly during the crisis, the tickets prices went up because the fuel prices went up. I have suggested few recommendations for Qantas to bounce back , what can be done without laying of the employees and have also spoke about cost cutting.
• Qantas had to make an increased profit and pay a dividend to its shareholders which increased over the years of management
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