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Assume that the audit for Allegiance Coal Limited (Allegiance), a mining company, will be coming up for tender. You and your colleagues are required to prepare a client evaluation report based on your research for the senior partners of your audit firm. Your report should provide preliminary information as to whether or not the audit firm should consider tendering for the audit of Allegiance. You should conduct extensive research and perform an analysis of the annual report of Allegiance for the year ended 30 June 2017 and any other relevant information that you have obtained (Hint: Companys website and Business news). In your report, you must address the following issues: 1. Provide an overview of the clients operations and industry in which it operates. (4 marks) 2. What are the specific reporting requirements (standards/laws/regulations) for mining companies? You need to list and briefly describe FOUR (4) standards/laws or regulations. (8 marks) 3. Identify and explain FOUR (4) significant business risks for Allegiance. You also need to describe how these risks may lead to potential material misstatements in the financial report. (8 marks) 4. Using the Allegiance 2017 annual report, identify and discuss Three (3) areas/accounts of concern. Why do you consider the chosen areas/accounts to be risky? (6 marks) 5. Complete the below table Formula Results 2017 Results 2016 Liquidity Current ratio Current assets/current liabilities Quick ratio Cash+ cash equivalents +trade and other receivables/current Liabilities Gearing ratio Total liabilities/total equity Debt ratio Total debt/total assets Profitability Ordinary earnings per share Per annual report (cents) Managerial efficiency Return on equity Net income/shareholders equity (3 marks) Commentary on financial performance: Using the data in above table, as well as your knowledge of the Allegiance and its environment discuss below the Allegiance groups: ___________________________________________________________________ 5.1 Liquidity (4 marks) 5.2 Profitability (1 mark) 5.3 Efficiency (1 mark) ___________________________________________________________________ 5.4 Overall financial position (1 mark) ___________________________________________________________________ ( 7 marks) 6. Based on your understanding of the client and assessment of the clients business and audit risks, would you undertake the audit? Why? (4 marks)

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