Dominos Australia: The Largest Chain Of Pizza Networks

Company’s franchisee rights for Domino’s Pizza brand worldwide

The company is the largest company when it comes to pizzas and it has the largest chain of  networks in the Australia and has a huge number of stores and network sales. It is the largest franchisee for the domino’s Pizza brand for the world. The company holds an exclusive number of franchisee rights for the brands and network in many countries (Dominos, 2018).

The company has not appointed any new director during the year 2017.

The following table shows in the calculated ratios:

Particulars	2017 in $ Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2016 in $	% change
Current ratio:	0.816112	0.69196	0.179417165
Current Assets	187825	184235
Current liabilities	230146	266250
Asset turnover ratio:	0.698151	0.6256	0.115963678
Net sales	790861	705702
Assets	1132793	1128033

The current ratio talks about the liquidity position of the company which means that the ability of the company to pay off its short term debts is good and it has improved when compared with previous year.

Again, the asset turnover ratio is the ratio which shows the ability of the company to generate in revenue from employing the fixed assets.

The ratio has improved which is a good sign. 

As per the section 307C of the Corporations Act of the year 2001, the auditors specified the following:

• The various different requirements as have been laid down under the corporations Act 2001 has bene fulfilled
• Also, any of the applicable code of the professional conduct has been duly complied with.

As per the section 307C of the Corporations Act of the year 2001, the auditors specified the following:

• The various different requirements as have been laid down under the corporations Act 2001 has bene fulfilled
• Also, any of the applicable code of the professional conduct has been duly complied with.

In terms of the non-audit services, all of the services have been detailed down in the note 42 of the financial statements of the company. The directors that satisfied that all of the provisions with relation with the non-audit services by the auditor are very much in line with all of the general standards of the independence of the auditors that have been imposed in the various different provisions of the Corporations Act, 2001. The directors are further of an opinion that the following listed down services as contained in the financial statements are not capable enough to compromise in the independence of the external auditor which is somewhat based on the advice which has been received from the Audit Committee of the company. And this is mainly due to the following listed reasons:

• All of the non-audit services that are being provided by in by the auditors have been duly reviewed and approved in order to make sure that none of it affects the integrity and the objectivity of the auditor
• The non-audit services being rendered are not capable enough to undermine in the general principles of the independence of the auditor as have been laid down in the ethics code. This includes in the reviewing or the auditing work of the auditor, acting in the management or working as in the capacity of the decision making for the company such as an advocate for the company or sharing in the economic risks and rewards.

Non-audit services being rendered by the auditors:

• Investigating accountants
• Other assurance services
• Other advisory services
• Due diligence

The following is the table which shows in the remuneration of the auditor:

Network firm of parent entity auditor
Particulars	2017 in $	2016 in $	% change
Audit of the financial statements:
Europe	3,62,755.00	3,19,126.00	-13.67%
Japan	1,99,319.00	2,52,054.00	20.92%
Other non audit services:
Europe – taxation compliance services	83,671.00	30,922.00	-170.59%
Europe – transaction services	–	–
Japan – transaction services	19,446.00	45,698.00	57.45%
Total	6,65,191.00	6,47,800.00	-2.68%

Auditor of the parent entity
Particulars	2017 in $	2016 in $	% change
Audit or review of the consolidated financial statements	3,25,149.00	3,65,285.00	10.99%
Other non-audit services:
Investigating accountants	–	–	#DIV/0!
Other assurance services	35,000.00	10,000.00	-250.00%
Other advisory services	1,17,500.00	1,09,775.00	-7.04%
Due Diligence	–	–
Total	4,77,649.00	4,85,060.00	1.53%

The above could be concluded in the form that the remuneration which is being paid to the auditors for their services has reduced as a whole (1.53%-2.68%).

There is an Audit Committee of the company. The committee consist of 3 members and that are entirely non-executive independent directors of the DPE. It has the Chairman which is not the chairman of the Board of DPE.

Calculated financial ratios for the year 2017

The Charter of the committee is reviewed once in every two years and also updated by the Board of the directors if required, on the recommendation from the Audit Committee. 

With regard to the membership, they are appointed by the Board. As per the charter of the committee, all of its members have a higher degree of diverseness and have some of the complimentary skills and are sound when it comes to being liberate. The members of the committee are Messrs, Adler, Cave and Bourke. The chairman of the stated committee is Mr Adler who is an independent directors. His qualifications and the degrees that he possess are stated therein the Corporate Directory section of the Annual Report of the company.

The committee has the following duties and responsibilities:

• It is the duty of the Board to suggest on all of the different aspects of the internal as well as the external audit
• It is something that gives its views about the adequate of accounting and the various different procedures involved when it comes to the management procedures, system, controls and the financial reporting.

The following are the specific responsibilities that the committee has:

• Making suggestions to the board with regard to the appointment, re-appointment and the removal of the external auditors
• Keeping in track the degree of independence of the external auditors
• Making suggestions about the work that is being performed by the auditors.
• Making suggestions about the engagement of all of the external auditors and also monitor in their performance
• Reviewing the effectiveness of the information of the management along with other systems of the internal controls.
• Review all of the different areas of financial risk that are very much significant for the company
• Ensuring that all of the significant financial risk along with the different arrangements are well in place for the ones that are at an acceptable levels.
• Reviewing all of the major transactions that form the day to day part of the business operations
• Reviewing and monitoring and keeping a track of all of the internal controls and also ensuring compliance all with the corporations Act along with the ASX Listing Rules and also review in all of the external audit reports and ensure that there are prompt remedial actions of the same.
• Reviewing in the full year’s financial statements along with the half yearly statements of the company before the same are submitted to Board.

For the purposes of carrying out all of the above stated functions, the committee has the transparent lines of communication which exists between itself, the internal auditors, the external auditors and the management of DPE. 

As per the section 307C of the Corporations Act of the year 2001, the auditors specified the following:

• The various different requirements as have been laid down under the corporations Act 2001 has bene fulfilled
• Also, any of the applicable code of the professional conduct has been duly complied with.

The following are the ley audit matters that are reported in by the management:

• In respect of the carrying value of goodwill and the indefinite life of all of the intangible assets that exists in Japan and Germany’s cash generating units, in line with the valuation reports from the experts or the audit procedures, the same were carried out. The appropriateness of the methods that have been applied in by the management when it comes to calculating the recoverable amounts of the cash generating units. The various assumptions were also challenged when it came to the calculation of the discount rates and the recalculating of these rates. The various different projected cash flows along with the various assumptions which relates in with the expected rates of growth and the operating margins as against the historical performance, the projections of the management and the data of the observed industries, were duly tested for adequacy and effectiveness. The categorisation of the cash generating units of the company. The allocation of the goodwill to the carrying value of the cash generating units was also considered and tested for adequacy. The mathematical accuracy of these cash generating units was also cheeked. Sensitivity analysis was conducted on the recoverable amounts of these cash generating units in and around the key drivers of the growth rates that were being used in the forecasting of the cash flows and the discount rates.
• In terms of valuation of the various put options, in line with the valuation of the experts, many of the audit procedures included the assessment of the appropriateness of the methods that have been applied in by the management when it comes valuing in the option and the assessment of the various key assumptions which includes in the expected future earnings of each one of the components. The expected timing of these exercises of the put options and the discount rates was also done. The assessment of these assumptions that were used in the model of valuation for the purposes of ensuring that these are in as per the terms of the put options that have been prescribed in the agreement of the shareholder. The independence, competence, objectivity of the expert of the management was also evaluated. A sensitivity analysis of the various key assumptions of the valuation model was also done. The mathematical accuracy of these calculations of the put options was also tested in,
• In terms of valuation of the various put options, the assessment of the methods that were applied in the group was tested along with the calculation of the liability of the put option. The various inputs used in by the management was challenged and also, the calculation which was done for the purposes of arrive in at the liability of the put option as per the terms that have been prescribed n by the agreement of the shareholders were checked. The correspondence with the counterparty as being the part of the completion of the exercise of the put option was inspected. The appropriateness of the various related disclosures required was also checked.
• In terms of the accounting for the guarantees contingencies and the claims that were related with the group, the process of the management for the purposes of valuating in the different guarantees was evaluated. The status of any new and the existing claims along with the contingencies were assessed. This was done through the inquiry pf the management and the legal advisors of the group. The confirmation form the legal visors was sought. The minutes of the board meetings along with all of the relevant information were inspected thoroughly which was presented to the directors. The appropriateness of the various disclosures was also checked in the financial statements.

The main responsibility of the auditor is to plan in and also perform the audit in order to obtain a reasonable assurance of the fact that the financial statements are free from any material misstatements whatsoever and that there is no error or any fraud in them. This is mainly due to the fact that the nature of the audit evidence and the characteristics of the fraud, the auditor would not be able to obtain an exact assurance that there is no falsified business in the financial statements (PACOBUS, 2018). The financial statements is the primary responsibility of the management. The responsibility of the auditor is just to express an opinion on the truthfulness and the fairness of these prepared financial statements (University network, 2018). The management is the one that is responsible for the purposes of adopting in the sound and correct accounting policies. It is the management which is responsible for the intiation, recording, processing and preparing these financial statements. 

The Annual report of the company states that there is as such no matter or circumstance by the end of the accounting year that could have affected in or could significant affect the operations of the consolidated entity. There are material subsequent events that could affect in the results from those operations or the stated of the affairs of the consolidated entity in the future financial years.

But there is an event after the reporting date which is that on August 14, 2017, the directors had declared in the final dividend for the financial year which ended on July 2, 2017.

The information as has been contained in the annual report of the company is sufficient enough to assess the reporting adequacy of the company.

The following questions could be posed in to the auditor:

• Any fraud detection program that the company has?
• The company’s policies to make sure that there is no insider trading?
• Adequacy of the internal controls
• The appropriateness and the adequacy of the internal controls (PWC, 2006).

Conclusion:

The company does have the Audit committee which has the roles and responsibilities of overlooking all of the business functions of the company and to make sure that the company is performing properly and that it is disclosing all of the relevant facts correctly and as per the relevant accounting regulations.

The responsibility of the management sis to prepare in the financial statements.

As per the Statements of Auditing Standards, the transactions that are entered into during the course of the events of the company are within the scope and within the knowledge of the management of the company and hence, they are the right people to prepare the financial statements. Their knowledge is all about the business that they have been indulging themselves in. the main responsibility of the auditor is the expression of their opinion on the truthfulness an fairness of the financial statements. The auditor could give suggestions to the management with regard to the preparation of the financial statements but the sole responsibility is still of the company.

Though the facts contained in the annual report are all relevant but then an investor could pose some questions such as the programs that could test the adequacy of the internal controls 

References:

Asx300list.com. (2018). ASX 300 List – Data for ASX Top 300 Companies. [online] Available at: https://www.asx300list.com/ [Accessed 8 Sep. 2018].

Concernedshareholders.com. (2006). Questions that could be asked at shareholders meetings. [online] Available at: https://www.concernedshareholders.com/CCS_ShareholderQuestions.pdf [Accessed 8 Sep. 2018].

Dominos.com.au. (2018). Annual report 2017. [online] Available at: https://www.dominos.com.au/media/91141/2017.pdf [Accessed 8 Sep. 2018].

Dominos.com.au. (2018). Domino’s Corporate – Domino’s Pizza. [online] Available at: https://www.dominos.com.au/inside-dominos/corporate [Accessed 8 Sep. 2018].

Network, U. (2018). Management’s Responsibilities | Office of Internal Audit | Nebraska. [online] Audit.unl.edu. Available at: https://audit.unl.edu/managements-responsibilities [Accessed 8 Sep. 2018].

Pcaobus.org. (2018). AU 110 Responsibilities and Functions of the Independent Auditor. [online] Available at: https://pcaobus.org/Standards/Auditing/Pages/AU110.aspx [Accessed 8 Sep. 2018]