Alumina plc: A case study of the post-audit of capital investment expenditure

Malcolm Smith

Accounting Education, 2006, vol. 15, issue 2, pages 217-225

Abstract: The case examines investment expenditures made by a major Australian manufacturer involved in the mining of bauxite ore and its refinement into alumina. The expenditures, around which the case revolves, are intended to increase the efficiency of operations of one West Australian refinery, consistent with corporate goals of cost reduction and profit improvement. The investment evaluation processes then in place at Alumina plc permitted the joint evaluation of multiple projects, even where the relationship between the projects might be tenuous. The case details one such multi-project investment and facilitates an evaluation of the components in a way that suggests that the appraisal process might be flawed, or at least sub-optimal.

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