Dick Smith Holdings (DSH) was originally an independent store founded by prominent entrepreneur Dick Smith in 1968. Woolworths acquired a 60% stake in 1981and the remaining 40% in 1983.
In November 2012, a private equity firm (Anchorage Capital Partners) purchased Dick Smith from Woolworths for a sale price of $115 million, of which reportedly they only paid somewhere between $10-15 million with their own money. In November 2013, DSH issued a prospectus for the sale of shares to the public at $2.20 each. This successful Initial Public Offering (IPO) resulted in a market capitalization of $520 million. Two years later in December 2015, DSH went into liquidation. In just over 12 months, Anchorage Capital Partners turned the $10-15 million investment into a $463 million of cash. You are required to answer the following questions:
1. What was the purpose of the audit of DSH by Deloitte, and was the purpose served?
2. Evaluate the collapse of DSH from the perspective of auditing’s role in developing common good, stewardship and social responsibility of DSH.
3. The accounting profession is bound by code of ethics (APES110) which requires that accountants act in the public interest. Identify ethical issues and the role of auditors that would have contributed to the downfall of DSH.
Following criteria will be used to mark the written section of the assignment:
#
Marks Allocation
1
Introduction
2
What was the purpose of the audit of DSH by
Deloitte, and was the purpose served?
7
3
Evaluate the collapse of DSH from the perspective of auditing’s role in developing common good, stewardship and social responsibility of DSH.
4
Identify ethical issues and the role of auditors that would have contributed to the downfall of DHS,
5
Conclusion
6
Total
25
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