This is an analysis report of Qantas Airways Limited (Qantas Group) basis on the 2011 annual report. For the auditing purpose, the report will mainly focus on auditing perspectives. First of all, an overview of the company and industry, it gives an idea of what the business conditions in which they face with. By using the SWOT tool, we ensure the analysis is matched with the real business situations. Moreover, the report will discuss different categories of laws which would be applicable the Qantas Group and also the potential level of the reliance that placed on the control environment of the Qantas Group. Furthermore, the report will briefly give a planning materiality bases and percentage regarding to our analysis. Accordingly, two of highlighted risk accounts would be discussed and followed by the relevant substantive audit procedure.
Overview of the Company and the Industry
1.1. Company Overview
Qantas Group is the largest Australian airline group company which has a long history. It serves almost 80 destinations in 20 countries. Until 2010, 65% of domestic airline market in Australia was occupied by Qantas, it also hold 28% of international airline market share (Qantas, 2011a). In the first half year of 2011, the total revenue of Qantas Group was $14.894 billion. The two major airline brands Qantas and Jetstar were the revenue source of Qantas Group (Qantas, 2011b). In details, Qantas provides premium full service and Jetstar provides economic low-fare service, that is, these two brands constitutes the different level of service of Qantas Group to satisfy different kind of customers. On the other hand, QAN's core strategy is to develop its two profitable flying brands, and the differentiation is the competitive strategy which has been implemented by Qantas Group. 1.2. Industry Overview
After the 911 event in 2001, the airline industry all over the world suffered a powerful influence on its business. “The industry is fragile and balancing on a knife edge”, said by the CEO of International Air Transport Association (Investment U, 2011). The safety issue became a seriously challenge for the airline industry. In addition, as a result of the financial crisis from 2008, investors all over the world lost their confidence in the capital market, and then the petroleum price and the international exchange rate become fluctuant which significantly impact the airline industry. As the economic globalisation, Australia airline industry is in the same business environment as other countries during the same period. Consequently, the average growth rate was only 0.1% from 2006 to 2011 (IBIS World, 2011). However, in the Australian airline industry, Qantas is the largest company who hold the largest market share, Virgin Blue, Regional Express, SkyWest and Tiger Airways are the major competitors of Qantas in the domestic airline market. 1.3. Porter’s Five Forces analysis of the airline industry Threat of New Entrants –Low: it is hard for a new entrant to enter in the airline industry as it requires large amount of capital, professional operating procedures, skilled employers, specialized equipment and large amount of maintenance expenditures. At the same time, strict legal regulations are another barrier for the new entrant, as it needs to distribute the limit airline channels and the Federal Airports to each Airline Company again, and the operation standard has to be updated, for example, Air Navigation Regulation (Australia Government Department of Infrastructure and Transport, 2011a). In addition, the Australia market is very limited because of the limited population. Competitive Rivalry between Existing Companies – High: The extremely low growth rate of Australia airline industry which was only 0.1% from 2006 to 2011 significantly aggravated the competition among the existing competitors (IBIS World, 2011). As the similarity of airline services, each airline company could primary to compete in...
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