The final project for this course is the creation of an audit report with memos.
Auditing is a valuable skill in accounting and business, as the
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odds are very high that you or your organization will be subject to a compliance, federal, IRS, internal, government, or revenue audit at one point in your career. Accountants are required to make professional judgments on both the financial accounting issues and internal accounting forecasts within their organization. The auditor must provide fair, unbiased, materially correct information for investors, employers, employees, and independent stakeholders. This course will help you navigate the relevant processes to provide that unbiased, accurate information.
The purpose of the assessment is to familiarize you with the process of auditing and what to do with the auditing information once you have it. You will explore how to plan audit work, analyze financial statements, perform tests on that information, and properly and professionally communicate the results of an audit.
The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Three, Five, and Seven. The final submission will be due in Module Nine.
In this assignment, you will demonstrate your mastery of the following course outcomes:
· Determine risk factors for organizations based on analysis of audit risk, audit evidence, and financial statement assertions
· Develop strategies to mitigate potential risk factors using organizational internal controls
· Create an audit program to achieve audit objectives related to revenue
· Analyze audit reports for appropriately communicating the result of the audit process
· Devise a sampling program for the audit universe to formulate field activities
Prompt
For this assessment, you should assume you are on the internal audit staff of a publicly traded company. Choose one of the following companies: Walmart, Target, Sears, Kroger, or Amazon. You will be required to obtain the last two years’ worth of financial statements and a recent audit report. The internal audit group at the company is tasked with preparing for an upcoming revenue audit and analyzing the business risk internally to mitigate audit findings. You will conduct an internal audit of the company using the information gathered and create a report. Then, you will prepare appropriate memos analyzing the audit report you have prepared, while offering feedback and recommendations.
Specifically, the following critical elements must be addressed:
I. Procedures and Field Work: For this part of the assessment, you will begin your audit report using the information you have gathered to address the following elements pertaining to procedures and field work.
A. Describe how you would conduct the audit process, incorporating the analytical procedures you would use to investigate selected business transactions.
1. What steps will you take to review the company’s business transactions?
2. What would your plan be to utilize these procedures?
B. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue.
1. What would you need to do in the field to investigate these?
2. Could you convey this information through charts or other supporting documentation?
C. Create a test to assess appropriate assertions for designated high-risk business transactions.
II. Risk Factors: For this part of the assessment, you will continue your audit report using the information you have gathered to address the following elements pertaining to risk factors in all the major business transactions.
A. Analyze the income statement for any potential risk factors and compliance issues with Generally Accepted Accounting Principles (GAAP) or International Financial Recording Standards (IFRS).
B. Analyze the risk factors and compliance issues with GAAP or IFRS on the balance sheet.
C. Using the internal control, analyze the cash and revenue for potential risk factors.
1. What risks need to be documented?
2. How does this information compare to the company or industry averages, or the company’s past performance?
D. Explain the audit universe and how you identified it.
E. Based on your analysis of risk, devise a sampling program for the audit universe.
F. Choose the most preferable audit testing procedures that could be used in the field, based on the audit universe items sampled in this situation.
III. Memos: For this part of the assessment, you will use your audit report to prepare memos to upper management.
A. Prepare a memo to be reviewed by the chief financial officer (CFO) that summarizes the audit process.
1. Explain any sampling or other audit work that could be done, and if you would recommend the company pursue this additional work. Justify your response.
2. Make recommendations to the CFO on how to mitigate potential risk factors for major business transactions identified in the audit report.
B. Assume you are now the CFO. Prepare a memo to the Board of Directors as to what potential issues the external audit team might find and what the company’s response should be.
1. Evaluate the findings from the audit report. Be sure to view these findings from the CFO’s point of view.
2. Develop a strategy to mitigate risks identified in the audit report.
3. Describe how the company might implement the strategy based on the findings from the audit report.
Milestone One: Draft of Procedures and Field Work (Section I)
Milestones
In Module Three, you will submit a draft of the procedures and field work required for conducting your audit process. Describe how you would conduct the audit process for the company you have chosen, including the analytical procedures you would use to investigate selected business transactions. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue and create a test to assess appropriate assertions for designated high-risk business transactions. This milestone is graded with the Milestone One Rubric.
Milestone Two: Draft of Risk Factors (Section II)
In Module Five, you will submit a draft of risk factors as identified for all of the major business transactions conducted by your chosen company. Analyze the income statement, balance sheet, and cash and revenue for any potential risk factors and compliance issues with Generally Accepted Accounting Principles (GAAP) or International Financial Recording Standards (IFRS). Based on your analysis of risk, devise a statistical and judgmental sampling program for the audit universe. Recommend the most preferable audit testing procedure based on the audit universe items sampled. This milestone is graded with the Milestone Two Rubric.
Milestone Three: Draft of Memos (Section III)
In Module Seven, you will submit a draft of your memos to upper management. First, you will prepare a memo to be reviewed by the chief financial officer (CFO) of your chosen company that summarizes the audit process conducted. Then, you will assume the role of CFO of the company and prepare a memo to the Board of Directors as to what potential issues the external audit team might find and what the company’s response should be. This milestone is graded with the Milestone Three Rubric.
Final Submission: Audit Report with Memos
In Module Nine, you will submit your audit report with memos offering feedback and recommendations. It should be a complete, polished artifact containing all of the critical elements of the final project. It should reflect the incorporation of feedback gained throughout the course. This submission is graded with the Final Project Rubric.
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