The company the team chose is Alphabet formallyGoogle, and competitor is Yahoo
You are a senior manager for the highly successfulregional CPA firm of Fine, Dee, Evah, Dense, LLP (Fine). Since itsinception nearly 30 years ago, Fine's audit practice hasexclusively consisted of auditing private and not-for-profitorganizations. Recently, the partners have been considering anopportunity to audit a publically-traded company for the companyyour team has selected.
The primary reason Fine has not heretofore venturedinto auditing public-traded companies is because of the potentialrisk and legal liability associated with auditing public companies.However, Fine has been a bit stagnant, business-wise, for the pastfew years, and some of the older and more risk adverse partners arebeginning to retire. Consequently, the lure of the often-lucrativeand prestigious opportunity to audit a public company has become tohard to resist, so the partners have decided to pursue the chanceto audit this company.
On a beautiful early-september morning you are calledinto the senior partner's office and told you and your team havebeen selected to lead the first-ever effort to audit apublic-traded company for Fine. You are honored, but also knowauditing a public company is a bit more tricky and complicated thanauditing private and not-for-profit organizations. Fortunately, thesenior partner had considerable experience early in his career withanother firm in auditing public companies and told you he would bewith you all the way. Relieved, you asked him what he wanted you todo. He tossed you the most recent Form 10-K of the company youselected and gave you the following assignments:
Review and discuss the Form 10-K for the company youhave selected.
Create a report that will have 4 Sections.
Section 1. Initial Risk Assessment
Hint: The business and risk information is usuallyfound in the first part of the risks, do not simply restate what isin the Form 10-K. Think like a senior manager at a CPA firm-whataccounts (cash, A/R, Inventory,etc.) might be the most potentiallyrisky and Why? For example an airline might not have the sameinventory considerations found with a retail outlet likeWal-Mart.
Describe the following issues:
Ethics and legal Issues
1. The ETHICS and sophistication of top management andcultures where the company operates.
2. Have there been significant auditing or accountingissues raised in the recent past?
3. Did they have disputes with their previous auditfirm?
4. IS this company or industry particularly susceptible to lawsuitsor other legal proceedings?
Evaluate the regulatory and compliance andrequirements of this company.
1. The compliance requirements of this company.
2. is it subject to a high-level of governmentalregulation?
3. Are employees unionized? Are they generallycompliant with Sarbanes-Oxley and other regulatory rules?
Section 2. Analytical Procedures
Based on Table 8-1 Examples of Planning AnalyticalProcedures and the sections on Analytical Procedures, select threeratios ( current, ratio, Inventory turnover, debt to equity, returnon assets). calculate these ratios for the most recent year andcompare the results.
Write a 350 to 525 word analysis of your findings
Section 3. Materiality and Risk
The senior partner wants to confirm your understandingof key concept.
Summarize each concept 90 to 175 words each.
materiality
misstatement
audit risk
audit risk model
inherent risk.
relationship of risk to audit evidence
