FIN6002: Jane Goldsmith Plc, a listed company, is a leading UK retailer of up-market clothing, shoes and accessories sold primarily: Audit Assignment, AU, UK

Question 2

Jane Goldsmith Plc, a listed company, is a leading UK retailer of up-market clothing, shoes and accessories sold primarily under the “Jane Goldsmith” brand name. The brand represents classic styles, updated to reflect current fashion trends. Company stores offer a full range of
business and casual outfits, shoes and accessories coordinated as part of a total styling strategy. The company places a significant emphasis on customer service; sales associates are trained to assist customers in item selection and wardrobe coordination, helping them achieve a classic yet chic and current look, while maintaining the customers’ personal styles.

The company’s core business is focused on relatively affluent, fashion-conscious professional women with limited shopping time. Substantially all of the company’s merchandise is developed in-house by its product design and development teams. Production of merchandise is sourced to independent manufacturers in 14 countries. Approximately 35%, 15% and 5% of the company’s merchandise is manufactured in China, Thailand and Indonesia respectively.

The company operates 80 stores countrywide (under operating leases), having closed down 35 stores over the last two years. Merchandise is distributed to the company’s retail stores through three distribution centres spread across the UK.

jane Goldsmith Plc. remained profitable amid the global financial crisis and as at 31 January 2023, the company had gross revenue of £1.3 billion and net profit of £121 million. The ompany recognises revenue as and when merchandise is sold to clients and a provision for estimated returns is established when sales are recorded. In terms of expenses, the company spends a lot on advertising and marketing; (Advertising costs were approximately £65 million for the year to 31 January 2023); salaries and wages (£245 million as at 31 January 2023), among others. The company’s non-current assets as at 31 January 2023 are valued at £1.1 billion.

However, the company intends to focus on reducing its cost structure over the next financial year, in light of the volatile nature of the current economic environment. Your firm, Holmes and Poirot, is in the initial planning phase of the audit for the year ended 31 January 2023. As the audit senior, you have been assigned responsibility for determining materiality. The audit partner has performed a preliminary analysis of the company and its performance and believes the likelihood of fraud is low.

Required:
a) Detail the matters to which you would pay particular attention in obtaining the required knowledge of the business and in developing your audit plan for the year ended 31 January 2013.

b) Identify and describe FOUR matters that give rise to audit risks associated with the audit of Jane Goldsmith Plc. 

c) Explain the concept of “materiality” and its importance during the audit planning process.