Audit Presentation
Transcript: Other Risk Factors * Analyze and understand your company’s financial records * Identify key areas for improvement in your company * Assess risks, economy, efficiency and quality * Evaluate new technology * Uncover fraudulent or other illegal activities within your company * Reinforce and strengthen internal control 28.82 Walmart Items To Select Audit Risk Model Items with large dollar value & randomly selected items 1.23 Recognizes sales revenue net of sales taxes and estimated sales returns at the time it sells merchandise to the customer Purchases of shopping cards are not recognized as revenue until the card is redeemed for purchases Sam’s Club membership fees recognized over term of membership (12 months) Documentation Costco Specialized Accounting Treatments ... small -.006 (cc) image by anemoneprojectors on Flickr Completeness Completeness 6.23 .200 12.67 Earthquake in Japan Effect of inability to estimate value of damages and insurance recovery from event "...do not believe that any damages would be material to our financial position." Social Matters Earnings per Share Occurance .883 1.14 Physical Examination Classification % Change From 2011 Existence 3.43 -.1685 How to Manage Business Risk Industry 1.95 Times Interest Earned Transactions with large dollar value & randomly selected items Applying Analytical Procedures Subsequent Events Return on Assets % Change From 2011 Walmart Gross Margin Inventories: primarily lower of cost or market LIFO Sam's Club: weighted-average LIFO Walmart International: FIFO Recording markdowns Estimating Shrinkage - inventory losses based on physical inventory counts recorded as % of sales .466 Mostly undrawn lines of credit from 28 financial institutions totaling $11.5 billion Strictest covenants limit maximum amounts in secured debt and long-term leases Application of Evidence to Decisions Sample Size Items to Select Balance sheet date .470 .587 Ability to Meet Long Term Debt Obligations Management Assertions 4.52 Valuation & Allocation In the first quarter of fiscal 2011, certain information systems' expenses previously included in unallocated corporate overhead have been allocated to the segment that is directly benefitting from those costs. 6.12 Occurance and rights and oblications Accuracy Posting & Summarization Balance sheet date Existence Puerto Rico Segment Realignment -.061 Inventory Turnover Walmart 11.43 Segment Reporting Timing Net deferred tax liabilities has greatly risen from $891 million on Jan 31, 2010 to $1.695 billion on Jan 31, 2011. Accounting Risk Considerations 1.16 Completeness Compare invoices to purchase orders and general ledger accounts 4.28 Possible Effects of Audit/Examinations on Income Tax Positions Client Business Risk Walmart and Its Industry FY 2011 Company Review Understanding the Client Business & Industry Audit Evidence Decisions Cash and Cash Equivalents Investments with maturity ≤ 3 months Credit/Debit card transactions and EBT (electronic business transactions) to be processed within < 7 days 8.70 Auditing Walmart Presented by: Walmart Business Risks Transactions with large dollar value & randomly selected items 58.61 Classification (cc) photo by medhead on Flickr Retail Method of Accounting Current Ratio Management Assertions Transaction-Related Objectives 1.71 Audit Objectives .059 Audit Objectives Walmart Balance-Related Objectives Audit Procedures Collecting Audit Evidence Factors affecting business risk can be internal or external Examples: fluctuations in the economy, performance/addition of competitors, success/failure of client’s strategies and operations 21.03 Liquidity Activity Ratios Net Sales: $419 billion Total Assets: $181 billion Employees: 2.1 million worldwide 1.4 million in the U.S Assets and liabilities: translation using exchange rates at balance sheet date Income statements: translated using average exchange rates for the respective period -.0269 Walmart -.0095 Compare cash balances to bank statements, & credit card purchases to A/R Expansion strategies risk Worldwide operations Natural disasters Legal proceedings .105 Completeness Completeness Rights & Obligations U.S: 4,400+ stores International: 4,000+ stores Audit Evidence .099 Walmart Sample Size Identifying Key Risk Areas Costco Legal & Regulatory Matters Accuracy Linking Management Assertions to Audit Objectives Accuracy & Evaluation Management's responsibility to address business risks Disclosed in MD&A in 10-K for investors Auditors perform analytical procedures Address liquidity, profitability, etc. Residual risk Balance sheet date Audit Objectives Timing .077 Type of Evidence Timing Occurance and rights and oblications Labor law Anti-discrimination laws International trade laws Predatory pricing Products must meet federal regulations short term debt deferred taxes inventory .126 .081 Management’s Report to Shareholders (Low Risk) Days to Sell Inventory Classification & Understandability Target Profit Margin Cassandra Salcedo Max Weinstein Maurine