Big Rock

Topics: Auditing, Risk, Balance sheet Pages: 16 (5252 words) Published: February 9, 2012
First CLASS AUDIT Group|
Audit Report|
Big Rock Brewery Income Trust|
Andrew Code
Tyler Hakesley
Carly Johnson
Wasay Wahid
Leanna Whyte


Knowledge of the Business1
Position within the Industry3
Economic Position3
Related Party4
Corporate Governance4
Significant Risks5
Audit Risk7
Overall Audit Strategy8
Fraud Risk Assessment9
Risk Assessment Procedures9
Key Risk Factors10
Factors Decreasing Fraud Risk10
Assessment of Possible High Risk Accounts10
Overall Conclusion11
Analytical Procedures11
Information System12
Expenditure Cycle Analysis13
Going Concern Assessment14
Top Three Laws & Regulations15
Laws & Regulations15
Appendix A: Materiality17
Appropriate base:17
Qualitative considerations:17
Performance Materiality – 60%-85%:17
Specific Materiality:17
Appendix B: The Governance Committee’s Mandate18
Appendix C: Long term Supply Contracts19
Appendix D: Corporate Personnel19
Appendix E: Figures20
Figure 120
Exhibit 1: Analytical Procedures – Balance Sheet21
Exhibit 2: Analytical Procedures – Income Statement22
Exhibit 3: Ratio Analysis23

Knowledge of the Business
Big Rock Brewery is a craft beer brewery that prides themselves in the high quality of their beer and that they are entirely Canadian owned. They currently produce 12 different beers, 1 cooler, and various memorabilia. Their brewery and head office are located in Calgary Alberta and they have small marketing units located in other provinces. Big Rock’s main customers are pubs, restaurants, bars, and retail outlets. 28% of beer sales are in the form of kegs to pubs, restaurants and bars and the other 72% of sales are cans and bottles. Alberta has 77% of the total sales and the rest are in British Columbia, Ontario, and Atlantic Canada. In B.C., Big Rock’s beer is distributed through Island Beer Distributors, Container World, and Signature Beer Distributions. The Liquor Control Board of Ontario, Direct Cellars and Brewers Retail Inc are their main customers in Ontario and in Atlantic Canada Big Rock uses Atlantic Spirits and Wines Ltd as their sales representatives. The client also has co packing agreements with Moxie’s, Hudson’s Tap House, Fairmont Palliser Hotel, Heritage park, and President’s Choice. Overall Big Rock does not seem to be dependent on one particular customer, but is dependent on the total Alberta market, which was shown by the loss of key Alberta distribution points causing a portion of the 3.3% decrease in profits. Since there was a decrease in profits, the risk of overstating profits and understating expenses should be considered because those actions would increase the overall profit. Tests relating to the occurrence, completeness, and cut off assertions of those accounts should be performed. Three of the client’s main suppliers have been secured for the future by entering into supply contracts guaranteeing a set price per unit of supply in order to reduce price risk. They have entered into these agreements with ENMAX Energy Corporation, Direct Energy, and Rahr Malting. Detailed descriptions of these contracts are in Appendix C. The client’s few international suppliers supply them with specialty hops and are located in Yakima, Washington as well as other various locations around Europe. The prices of many of Big Rock’s ingredients also vary based on the quality of the weather where they are grown and the value of the currency of the country where they are grown. Since there is great variability in the cost of its ingredients this price risk is significant to Big Rock and is discussed on page 6. Big Rock has been able to adapt to changes in technology and trends, in fact they were one the first craft breweries to can their beer. In 2009, the client launched a new light lime lager as a reaction to the lime beer craze that was started by Miller Light...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Igneous Rock Essay
  • Rocks Research Paper
  • Essay about Rocks
  • Rocks Essay
  • Integratron and Giant Rock, Mojave Desert, California Essay
  • Wk3 Sedimentary Rock Worksheet Essay
  • samman naeem Essay
  • Rock Cycle Essay

Become a StudyMode Member

Sign Up - It's Free