Reference no: EM13340780
Objectives of this project are as follows:
1. To acquaint students with the annual report and Form 10-K of a publicly held company audited by a CPA firm.
2. To provide data for the practical application of different steps in the audit process.
3. To allow students to experience writing as is done in an actual business/audit setting.
Detailed Instructions:
1. Obtain a copy of a recent annual reportof your assigned publicly held company (Mohawk Industries) with stock actively traded on the New York, NASDAQ or other over-the-counter exchanges. Each student will have a company from the list provided by the instructor.
2. Answer the following questions using appropriate business prose, i.e., answer the questions in the body of the report. Do not simply list the question and the corresponding answer.
a. What is the company's industry?
b. What are its primary products?
c. What raw materials does the company use?
d. How large is the company:
e. Where is the company located?
f. What other people/companies are closely associated with this company?
g. Look at the annual report:
- What image does it intend to convey?
- What are the segments and functional contents of the report?
3. Obtain a copy of the Company's 10-K report for the same date as the annual report.
a. How does the 10-K differ from the annual report?
b. Supplement the answers to the questions under 2 as appropriate.
4. Obtain outside information about the company and its industry.
a. What are the key economic factors about the industry?
b. Where is the company in its life cycle?
c. What are the five or six most important factors for success in this business?
d. How does this company stand with respect to these factors?
e. Describe four or five key business risks related to the client's business and industry.
f. What notable accounting considerations are there for companies in this industry?
g. What legal or regulatory matters are of concern?
h. What social matters are of concern?
5. Analyze the company's financial strength:
a. Assess the financial strength of the company?
b. How is the financial strength likely to change in the next year or so?
c. What are its sources of capital and what is the value of the company's capital?
d. How have the capital markets responded to the company in the last year?
e. What is the quality of earnings?
f. How does the company compare with others in the industry?
6. Prepare a broad audit plan:
a. What material types of transactions and transaction cycles are involved?
b. What are the high-risk areas?
c. What are the low-risk areas?
d. If management faced tremendous pressure regarding the entity's financial performance, what opportunities might exist for them to engage in fraudulent financial reporting?
e. To what extent do you believe it will be appropriate to reduce assessed control risk?
f. How will audit effort be allocated among geographical areas?
g. What form of auditors' report do you expect will be issued; what does it mean?