Final Project Instructions

A major part of the auditing process is risk assessment (fraud risk and audit risk). After the risk assessment, audit procedures are created and performed to reduce those risks. As discussed throughout the course, the audit report is part of the financial reporting package of the company. In this activity, you will apply what you have learned throughout the course to evaluate a publicly traded company or organization for which you have access to its financial reporting information, including the audit report.

Project Description: Write a paper of between 800-1,000 words analyzing the company's audited financial statements. The paper should be formatted using APA guidelines.

Project Instructions: Obtain a copy of a company's most recently audited financial statements. Generally, audited financial statements can be found on the company website in the "Investor" section or on the SEC website (www.sec.gov). Read the annual report, which will include the financial statements and disclosures, the auditor's opinion, and any supplementary information provided.

Your paper will contain three parts:

1. Introduction - General company background, including business operations.

2. Body - Using the information you have learned from this course about various risks, identify the accounts or transactions that would be considered to have a significant risk of material misstatement. For each risk identified, discuss what type of risk and what auditing procedures you would apply as the auditor to reduce the risk.

3. Conclusion - Discuss the type of audit opinion that was given. What does the opinion mean?
Your analysis should include the following:

1. Prepare common-sized income statements and balance sheets (vertical analysis) for the most recent three years. This will show you a comparison of the accounts.

2. For the last four years, prepare trend or horizontal analysis for key financial and non-financial items (at least 2 of each), i.e., items that you consider critical to evaluating the performance of the company. These can be items such as sales, number of stores, etc.

3. Compute relative financial ratios and compare to the industry standards to evaluate the company against benchmarks.

4. Comment on the information found in the cash flow statement; e.g., What are the primary sources and uses of cash? How stable are the major sources of cash? What activities consume the preponderance of the cash? Should any risk be highlighted here and, if so, related to which items?

5. What is the company's policy regarding revenue recognition? What inventory cost-flow assumption is it using? Do the policies increase risk (i.e., make them more vulnerable to changes in the market)?

6. Comment on the business (economic), financial, operating, and technological risk facing the Company.