Sample Essay on Business risk analysis and strategic audit report

Business risk analysis and strategic audit report


Business risk assessment is the practice of determining whether a particular uncertain condition has the likelihood to intimidate the operations of business. It is considerable to carry out the business risk analysis to establish the significance of each business purpose. After assessment of the firm processes to agree on the rate of risk exposure to industry, it is important to examine the business functions (Altman, Haldeman & Narayanan 1977). This will help in determining the trade operations that require a contingency plan for those that could be dropped due to the high susceptibility to risk. In performing the business risk analysis, the organization can implement and forecast on strategies that deal with the risks both in the short and long run. Additionally, the business risk analysis can help a company in building up its defenses as well as assist them to recover quicker from the risk hazards experienced.

During my assessment of the business risks of Azure Minerals Ltd, one of the ASX listed companies and also the Australia’s leading mineral exploration company located in the state of Mexico, I learned that Azure is making progress in two highly developed stage copper projects in partnership with two of the major mining companies globally. The two most important partnership companies are the Alacran copper project with Teck Resources and the Promontorio copper project with the Rio Tinto Group. And after entering into the partnership with the world’s major companies in mining, the Company still continues to seek opportunities to acquire other assets which the company believes will add value for its shareholders (Altman, Haldeman & Narayanan 1977).

The primary products of Azure Minerals

  1. Promontorio (Copper-gold-silver)

It is one of the most progressive ventures of Azure Minerals Ltd. It is mainly constituted of highly graded copper-gold-silver deposit. The venture is located in Sierra Madre province in the state of Mexico.

  1. San Eduardo (copper and zinc)

The property is fully owned by the Azure Minerals Ltd. It is a composition of porphyry-hosted copper and skarn copper-zinc. To accelerate the exploration on this critical project, Azure formed a joint venture with Australian copper miner OZ Minerals Ltd. The joint venture is managed and staffed by Azure with technical assistance from OZ.

  1. La Tortuga (copper and zinc)

The project has the sole ownership of Azure Minerals Ltd. It is a joint venture between Azure Ltd and Japan Oil, Gas, and Metals National Corporation, (JOGMEC). The venture is run based on an agreement between the Azure and JOGMEC on the terms that, JOGMEL can solely fund the first US $3million of exploration expenditure to earn 51% interest in the project.

  1. El Telocote (gold, copper and Zinc)

Azure owns 100% of the project, covering about 138km2. It was acquired for its historical mine production and its refined copper and copper-zinc constituents. Additionally, it was purchased due to its strategic location between and adjacent to the San Eduardo and La Tortuga properties.

  1. Estacion Llano (gold)

It is a 24km2 project and is fully owned by Azure Ltd. It was discovered through conducting of magnetic ground survey and series of soil sampling. The venture is very rich in gold and contains up to about 1.5 million OZ of gold deposits.

  1. Pozo de Nacho (molybdenum)

It is an important property which is entirely owned by Azure Ltd. It is one of the promising ventures Azure Ltd has been strategizing on measures to boost its productivity. It contains a substantial body of molybdenum mineralization.

Corporate governance issues


Azure Minerals Limited has made it a key concern to adopt very strong internal control systems to enhance effective corporate governance in the organization and reliability of the applied systems of operations.


It is recommendable that every organization and its Board to puts in place appropriate benchmark to guide its corporate governance issues. It is equally important that the Board give appropriate statement reporting on the adoption of these recommendations where the company’s corporate governance is in line with the recommendations. Also, the Board should give a full disclosure where organizations corporate governance practices do not follow the recommendations (Harland, Brenchley & Walker 2003).

Disclosure of corporate governance practices

Disclosure principles and recommendations

Recommendation 1.1: The establish and delegate and distinct functions and duties for the board and senior executives.


The Azure Minerals Ltd has clearly defined the functions of the board and set them out in the Board Charter. The Board should serve with utmost good faith to make sure they oversee the operations of the management and to serve in the best interest of the stakeholders. The Board should also ensure that the management cooperate with the auditor and that they provide the auditor with relevant information during the audit assignment. This will enable the company achieve its corporate governance. The delegation of the authority and power should be based on professional qualification and experience. If excessive power is given to the senior executive, it will definitely result to the abuse of power resulting to bad corporate governance. The executives should also be appointed on an expiring contract basis.

Recommendation 1.2: The Company should develop a code of conduct and disclose its summary, highlighting how it protects the organization’s integrity. The company should also develop and concisely summarized practices that clearly define its legal responsibilities, obligations and expectations of its community including stakeholders and especially when reporting the unethical matters relating to corporate governance.


The company has established a code of conduct that governs its practices including maintenance of confidence and integrity, legal obligations and expectations especially from stakeholders. This includes reporting and investigating reports of unethical practices.

Recommendation 1.3: Companies should establish a policy concerning trading in company securities by directors, senior executives, and employees and disclose a summary of that policy.


The Azure resources company has established a policy concerning trading in the company’s securities by the directors, senior executives, and employees.

Recommendation 1.4: The management, under the direction of the board, should develop and implement measures, guidelines and practices to be used in the managing the company’s internal control system, risks, material business as well as creation of reports that detail the effective management of the risks. The board should disclose that the management has reported to it as to the effectiveness of the company’s management of its related risks and the measures to curb the risks.


The board of Azure Minerals established guideline in the company to ensure that the management strictly designing, implementing and maintaining the internal controlling systems that effectively analyze and manage the business risk. The board of Azure Mineral should frequently check on the effective risk management measures carried out by the management.

Recommendation 1.5: The audit committee should be structured so that it consists only of nonexecutive directors, majority of independent directors. The committee is chaired by an independent chairperson who is not chair of the board and has at least three members.


The Board of Directors in their AGM, should ensure that they appoint an audit risk committee that is structured of at least two members. They should ensure that the members appointed in the audit committee are independent non-executive directors. The non-executive directors are able to give honest and independent opinion without getting interference from the executives. The Chair of the audit committee should not be a member of the executive. While appointing the members of the Audit Risk Committee, professional and academic qualifications and experience should be considered. Only persons who are registered with the accounting and auditing bodies are appointed. This will facilitate the reliability in the management operation.

 Company’s materiality thresholds

The following guidelines should be applied when assessing the materiality of matters:

  1. The company’s current and non-current assets should be properly valued by the professional valuers and the correct values recorded in the statement of financial position.
  2. The statement of comprehensive income statement should be prepared as per the requirement of the professional standards to show the actual profit after tax or the loss and balances to be brought forward accurately in all financial years.
  • The company should outline its assets appropriately. The assets which are held as securities should be recorded and the terms of their condition to be well outlined in the company’s statements. Any item that has impact on the reputation of the company no matter how valueless it may appear to be, should be treated as material and if it is no longer productive to the company, then the organization can dispose of such assets.

Statement concerning availability of independent professional advice

The directors in most cases need professional advisors on matters pertaining to the company’s daily operations. The professional advisors enable the directors to provide an independent opinion, it is the boards policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then. Such expenses must be first evaluated at the Board meeting and only applied after getting approval and signature of the Chair. The company will pay reasonable expense associated with obtaining such advice from professional expert. The Azure Minerals company could avoid such costs by appointing directors with enough professional experience and qualification (Prahalad & Ramaswamy 2004).

Forensic investigation

The fraud triangle model and the fraud scale






An individual may be influenced by pressure to commit fraud. In some cases, individuals can also be driven by the sheer opportunity which they exploit to commit fraud. Others are also influenced rationalization. An individual’s position in the company may present an opportunity for committing fraud. The opportunity to commit a fraudulent activity and the chance to conceal it are also directly correlated. Therefore, it imperative that the auditor has the full knowledge of such opportunities because this will help in identifying probable fraud schemes individuals can engage in and how fraud risks occur when the controls do not operate as intended by Azure resources management

In financial reporting of fraud, it is imperative that such the auditor identifies sources of pressures that can drive individuals to engage in fraudulent activities. Such pressures include sales and earnings growth history, analyst forecasts and management earnings which are commonly used in the personal integrity versus rationalization fraud scale. There are four suggested observable traits that increase chances of committing fraud:

  1. The positional or functional authoritarianism within the Azure Minerals Ltd. The management is likely to be fraudulent due to the controlling powers and authorities vested in them. There is the need for the external auditor to keep check of the records of the company.
  2. The capacity of the management and staff of Azure Ltd to identify and manipulate weaknesses in the accounting and internal control systems. There is the need for the management to review the internal control systems and ensure they are strong and kept up to date.

iii.    Confidence that the fraudster will not be detected and that getting out of the fraud is very simple. The management and the staff of Azure Minerals Ltd have the perception that they can easily get away with their fraudulent behavior, and this has increased the rate of misappropriation in the company.

  1. The capacity to effectively internalize and decisively deal with individuals who are perceived to be good but engage in bad acts. The ability to deal with stress reduces the fear of being penalized among the fraudulent staff hence felling motivated to conduct fraud (Miller 1992).

The broad audit strategy of Azure Minerals

Overview of the audit strategy

The main purpose of any audit strategy is to institute best practices that will allow the auditing team to present a yearly overall view and recommendations on the organization’s risk management, control and governance to support the preparation of the statement of internal control. Also, to audit the organization’s risk management, control and governance through periodic audit plans in a way which affords suitable priority to the organizations objectives and risks. Besides, it facilitates the identification of resources that will enable the auditing unit meet the set auditing standards as they audit and present their report. Another purpose of the audit strategy is to ensure cooperation between the management of Azure minerals with the various external auditors as required by law. Such external auditors can also be accompanied by representatives from various relevant audit review bodies. Through the strategic audit mechanism, the company will be able to cooperate with the relevant authorities and bodies especially during auditing, quality assurance and consultancy procedures.


The key elements considered in developing the audit strategy of Azure Ltd

Vision statement

The ultimate goal for any auditing process is to serve the interests of the client and its stakeholders without any influence from both internal and external forces of the organization. To Azure, the process will the level to which its strategic goals and objectives have been achieved and ways to improve them in order to be productive in dynamic business operations.

Mission statement

The primary mission of an internal audit is to evaluate independently the key areas of success especially with regards to a company’s internal control systems. These are the benefits Azure will draw from the report as well as recommendations on how to improve on organizational performance. This will lead to the provision and professional assistance to the management of the Organization and the subordinates in achievement of Azures Minerals Ltd mission, objectives and goals.

Critical success factors

For Azure mineral company to achieve its mission, the following factors are of importance to the internal auditing:

  1. Strategic realignment in terms of functions and reporting line of Internal Oversight Division. (IOD)

Even thought internal auditing is not part of Azures operational management, the auditing team is answerable to the company’s Director General (Norrman & Jansson 2004). The internal auditors operate independently of the administration. However, in the process of conducting each exercise for the various stages of auditing, the team consults the Director General of Azure, senior management, member states and the external auditor.

  1. IOD procedures are dynamic and meet organizational needs

System procedures and processes are prepared and approved by Internal Oversight Charter (IOC) guidelines and regulations. These procedures and processes which include plans and manuals among others are important when it comes effective dispensation of internal auditing functions (Jüttner 2005).

Azure Company will gain from internal auditing through staff training. The staff will be highly skilled and talented which increases the company’s chances of retaining them as well as attracting new talents

In accordance with the Internal Oversight Charter 2, the Director, Internal Oversight Division shall ensure that it comprises of staff, appointed in accordance with Azure Minerals Ltd Staff Regulations and Rules, who have the required knowledge and qualifications when it comes to internal auditing. However, the Director General is mandated to oversee the continually development and promotion of this initiative in order to meet the requirements of the Internal Oversight Charter.

Planned objectives of the internal audit function

The primary aim of an internal audit is value addition to the company through evaluation and recommendation of best practices that will improve an organization’s systems, processes and structures. That is, internal auditing aims at introducing efficiency and effectiveness in organizational financial management by:

(a) Initiating vigorous risks analysis for proper planning process to tackle the current and emerging high risk areas such as planned, expertise and business risks (Norrman & Jansson 2004).

(b) Strategically reforming and realigning Azure’s strategic goals, oversight activities, objectives and plans with the findings of the audit report findings. This will ensure sufficient report is delivered as well as the organizations goals being achieved

(c) Realigning the organization’s operational approaches, allowing Azure to work closely with auditing external auditing bodies including forming a committee to oversee and advice the Board. This will reduce discrepancies in the company’s auditing processes and general internal control systems.

(d) harmonizing the check and balances between the internal audit and other assurance activities within Azure Mineral Ltd in association with the business risk management (Prahalad & Ramaswamy 2004).

(e) Improving the company’s incorporation of technology into its operational system including analytical tools which can be used for planning through projection of future possibilities and efficient reporting.

(f) Helping the company introduce effective communication channels especially between the senior management and the staff and other relevant bodies. And effective communication and feedback channel will increase efficiency of incident reporting, policy and audit reports and recommendations preparation and implementation in the company.

(g) The Board should frequently review and improve the quality of audit reports by improving on the means of gathering information needed in the audit report. This will enhance the reliability in the audit report provided.

(h) Introducing efficient and effective audit report assessment and enhancement approaches in the company especially those targeting its systems, operations and processes. This will be improved through an improved communication and feedback channel especially from its employees and stakeholders.

(i) Attracting new talents and ensuring employee loyalty especially with regards to the auditing unit. This will ensure that the team has the right mix of experience and expertise needed to execute their duties and functions effectively and efficiently.

In conclusion, the business risk assessment should be conducted for every business to ensure the risks that may result in business closure are eliminated in their early stages. The Azure Minerals Ltd need to take measures to facilitate the proper recording of the extracted minerals to reduce the chances of misappropriation. Additionally, the management of Azure should have clear follow up in all the affiliates and subsidiaries to minimize fraud in the respective branches.



Altman, E. I., Haldeman, R. G., & Narayanan, P. (1977). Zeta tm analysis a new model to identify bankruptcy risk of corporations. Journal of banking & finance, 1(1), 29-54.

Harland, C., Brenchley, R., & Walker, H. (2003). Risk in supply networks. Journal of Purchasing and Supply management, 9(2), 51-62.

Jüttner, U. (2005). Supply chain risk management: Understanding the business requirements from a practitioner perspective. The International Journal of Logistics Management, 16(1), 120-141.

Miller, K. D. (1992). A framework for integrated risk management in international business. Journal of international business studies, 311-331.

Norrman, A., & Jansson, U. (2004). Ericsson’s proactive supply chain risk management approach after a serious sub-supplier accident. International journal of physical distribution & logistics management, 34(5), 434-456.

Prahalad, C. K., & Ramaswamy, V. (2004). Co-creating unique value with customers. Strategy & leadership, 32(3), 4-9.