Develop a planning memo- business risks, Auditing

As a senior in a professional services firm, you have been assigned to plan the financial statement audit of a private company named Toy Local Corporation (TLC). In addition, the partner on the engagement has asked you to identify business risks that could adversely affect TLC's sustained profitability, so that they can be brought to the attention of the company's board of directors. These tasks will require you to draw on your knowledge of supply chain management, marketing, internal controls, audit assertions, and financial accounting.

Company Background

Toy Local Corporation (TLC) designs, manufactures, and markets a variety of toys, which are sold primarily to large national retailers like Wal-Mart, Toys R Us, Kmart, and Target. TLC is a small company compared to competitors Mattel and Hasbro; nevertheless, TLC's managers believe its toys are among the best in the world. Unlike the larger toy makers, which bring thousands of toys to market each year but experience success with only a fraction of them, 

Your firm, KWJM, has been TLC's professional services firm since 2001, providing audit and tax services for the company. The primary external user of TLC's audited financial statements is its bank. Assume it is now October 28, 2012. You have taken over audit senior responsibilities for the company's October 31, 2012 year-end financial statement audit, because the original audit senior has left the firm. As a private company, TLC is not directly affected by the Sarbanes-Oxley Act (SOX). However, the partner in charge of the engagement has advised you that, ever since the financial scandals at the turn of the century, TLC has become interested in strengthening its corporate governance. Two years ago, following the release of the AICPA's Audit Committees Toolkit for public and private corporations, TLC has asked your firm to consider not only financial reporting issues, but also significant business risks that could affect the sustainability of TLC's success in the toy industry. Although TLC's board of directors believes it is aware of strategic issues facing the company, it has been considering spinning off its digital toy division into a separate company and, subsequently, merging it with an upstart software company. Before embarking on a change in organizational structure, the board wants a ''second set of eyes'' to ensure it has considered all significant business risks that currently exist and could adversely affect TLC in the foreseeable future. TLC's audit committee is meeting in two weeks and would like the partner to explain significant business risks identified during KWJM's interim audit tests and the year-end audit planning.

The partner would like you to prepare an audit planning memorandum that addresses significant engagement issues, and specifically identifies matters relevant to the audit committee. To prepare the memo, you have consulted last year's audit file (Exhibit 1), findings of interim audit procedures (Exhibit 2), and a memo prepared by the engagement partner (Exhibit 3).

Requirements:

Develop a planning memo for the TLC engagement based on the information provided in the case. The planning memo should address the following issues:

1.  Business risks.

2.  Audit risk factors.

Bear in mind that the partner on this engagement is also responsible for many other client engagements. Consequently, while you should endeavor to be direct and succinct in your memo (limiting it to no more than two single-spaced pages), you should avoid assuming that the partner will fully recall all relevant facts, or that she will immediately recognize all important implications of those facts. In short, be sure to describe the specific facts that you consider relevant and explain the implicationsfor the TLC engagement.

Posted Date: 3/6/2013 6:25:39 AM | Location : United States







Related Discussions:- Develop a planning memo- business risks, Assignment Help, Ask Question on Develop a planning memo- business risks, Get Answer, Expert's Help, Develop a planning memo- business risks Discussions

Write discussion on Develop a planning memo- business risks
Your posts are moderated
Related Questions
Audit Approach The auditor: 1) Must get the cooperation of the client, as simply the client can authorise third parties that communicate along with the auditor. 2) Choos

The Accounting System ISA 400 Risk Assessment and Internal Control accounting system are the sequence of tasks and records of an entity by which transactions are procedure as a

Verification Procedures - Investment Verification actions should follow the common approach outlined in favor of tangible noncurrent assets. Conversely the following particula

Capital allowances vs. Depreciation Whether the client can prove such they will keep the existing levels of investment in original terms, then there may be justification to ac

Presentation and Disclosure - Audit of Accounting Estimates An enterprise should involve the following information relating to a discontinuing operation in its financial state

Please assist me with these assignments The auditors for Weston University are conducting their audit for the fiscal year ended December 31, 2011. Specifically, the audit firm is n


(i) Overview of the audit process (a) Identify the key steps in this framework/ concept. (b) Briefly explain each of the key steps, in your own words. (ii) Framework of cr

Requirements of the Companies Act Here the seventh schedule to the Companies Act gives the matters which must be expressly stated in the AUDITOR'S REPORT 1. Where they have

I need a 5 schedules like the sample on the attachment please follow the Instructions you will see in the instructions attachments 4 companies and you have to choose 5th one by yo