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One.Tel Case Strategic Business Risk Assessment, Inherent Risk Assessment and Preliminary Going Concern Assessment

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One.Tel Case
Strategic Business Risk Assessment, Inherent Risk Assessment and Preliminary Going Concern
Assessment
Nature of the Entity’s Business
One.Tel was launched in Sydney, Australia in May 1995. They were described as a global
telecommunications company offering a fully integrated product list including low-cost international
and national calls, Internet services, prepaid and post paid calling cards plus GSM mobile phone
services. Their strategies as customer-focused and dedicated to providing innovative, quality
telecommu...

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Question Preview:

One.Tel Case
Strategic Business Risk Assessment, Inherent Risk Assessment and Preliminary Going Concern
Assessment
Nature of the Entity’s Business
One.Tel was launched in Sydney, Australia in May 1995. They were described as a global
telecommunications company offering a fully integrated product list including low-cost international
and national calls, Internet services, prepaid and post paid calling cards plus GSM mobile phone
services. Their strategies as customer-focused and dedicated to providing innovative, quality
telecommunication services at reduced prices. Details of total revenue by geographic segment for the
year ended 30 June 20001
are as follows:
Country $M %
Australia 429.4 64
UK 144.7 21
France 15.1 2
Netherlands 36.6 5
Hong Kong 39.2 6
Other 13.2 2
Total 678.2
The Industry
Australia’s telecommunications infrastructure with a fully digitised network is as sophisticated and
as modern as any in the world. Land based phone lines penetrate about 96 per cent of all households,
with 2 million Internet subscribers and over 7 million Internet users. Mobile phone services are well
established in Australia with more than 8 million users or 42 per cent of the population, one of the
highest user rates in the world. Telstra, Optus and Vodafone each operate separate GSM mobile
networks. Telstra’s market share is around 57 per cent, Optus 31 per cent and Vodafone 11 per cent.
(Source: US Department of State FY2001 Country Commercial Guide)
Prior to the deregulation of Australia’s telecommunications industry on 1 July 1997, there were two
carriers. There are now 35 carriers who are often former service providers and are generally reliant
upon leasing network capacity from Telstra, although some are developing their own switching and
network capability.
The influx of smaller carriers into the telephony market has acted as one of the major developments
in producing important competitive results in the deregulated market. These carriers typically
provide international and long-distance calls and, more recently, complete telephony services. The
growth in revenue does not correspond directly with growth in the number of telecommunication
service providers due to greater market competition, reduced prices, and lower revenue per
company.
Telstra, the former monopoly carrier, is the dominant provider of Australia’s land-based telephony
service. This network has nearly 10 million connections and an annual growth rate of five per cent.
Telstra still dominates the telecommunications environment although its market share has dropped
significantly in recent years.
Mobile phone services are well established in Australia with more than 8 million users or 42 per cent
of the population, one of the highest user rates in the world. Telstra, Optus and Vodafone each
operate separate GSM mobile networks. Telstra’s market share is around 57 per cent, Optus 31 per
cent, and Vodafone 11 per cent.
Management
The Board of One.Tel comprised nine members, including five non-executive directors and four
executive directors. Due to the rapid growth of the industry described in the previous section
significant managerial experience in the industry was limited. The functions of the board included:
i. approval of corporate strategy, and financial plans;
ii. identifying and addressing areas of significant risk facing the company;
iii. reviewing and monitoring management processes and reporting mechanisms;
iv. monitoring financial performance;
v. Appointment of the senior management team.2
 

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Solution preview

Inherent risk means the risk which has been existing in the financials statement of an organization. This risk has mainly arisen due to the misstatement which can be either due to fraud or risk. Therefore, it has been required to assess the risk at various levels. Moreover it has also provided that the inherent risk has been risen mainly when there is probability of occurrence of the material miss statement in case of the bent of the internal control.  These risk have mainly been comprises

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