ACGB 7176 Final Project - Audit Reports/ Advanced Auditing Systems II: Final Project

Part 1 – Understanding Information Contained in Audit Reports You will be asked to find several publicly available audit reports for financial statements as well as internal control over financial reporting. For each ...

Part 1 – Understanding Information Contained in Audit Reports You will be asked to find several publicly available audit reports for financial statements as well as internal control over financial reporting. For each report, the case asks you to analyze the components of the report and determine the type of report issued by the auditor. Record your responses to each of the questions shown below after each question as you evaluate each report. Some of the reports also include additional questions for further research and analysis to gain an understanding of the facts and circumstances that should exist for the issuance of a particular type of report. For these questions, you will need to reference the applicable auditing standard(s) when formulating your response. Public Company Audit Reports: The first set of audit reports relates to publicly-traded companies. The annual financial statements for these companies are located in the 10-K filings on the Securities and Exchange Commission (SEC) website (http://www.sec.gov). You can search for specific company documents on the SEC Corporate Filing Search page at: http://tiny.cc/SEC-EDGAR. Once you see the list of companyspecific filings, search for “10-K” in the Filing Type box to narrow the search to only 10-K filings. An easy way to find the audit report within the 10-K is to search the document [Control + F] for one of the required words in the audit report title. 1. Find Coca-Cola Company’s 2014 10-K filing on the SEC website. The financial statement date is December 31, 2014. For this question, you will want to search for “Coca Cola Co” to find the correct entity. a. List the purpose of each of the first three paragraphs. The first paragraph of the report does three things: first, it makes the simple statement that the CPA firm has done an audit. Second, it lists the financial statements that were audited, including the balance sheet dates and the accounting periods for the income statement and statement of cash flows. Third, it states that the statements are the responsibility of management and that the auditor's responsibility is to express an opinion on the statements based on an audit. The scope paragraph is a factual statement about what the auditor did in the audit. The remainder briefly describes important aspects of an audit. The third paragraph states the auditor’s conclusions (unqualified opinion) based on the results of the audit.b. Why is the final paragraph included? The last paragraph of the report includes a cross-reference to the auditor’s separate report on the financial statements. It is used to help reviewers to gain a thorough understanding of the significant findings or issues. c. What is the date on which the auditor obtained sufficient appropriate evidence to support the auditor’s opinion? February, 25, 2015 d. What type of audit opinion was issued on the financial statements – standard unqualified, unqualified with explanatory paragraph or modified wording, qualified, adverse, disclaimer? Standard unqualified e. What type of opinion was issued on the internal control over financial reporting? Unqualified. The Coca-Cola Company and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria f. What criteria were used to evaluate internal control over financial reporting? The audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.g. What is the date of the auditor’s report on internal control over financial reporting? What does this date match? February 25, 2015. It matches the date of the audit report 2. Find Coca-Cola Company’s 2012 10-K filing on the SEC website. The financial statement date is December 31, 2012. Similar to question 1, search for “Coca Cola Co” to find the correct entity. a. This audit report has an additional paragraph. What is the purpose of this paragraph? Generally accepted accounting principles require that changes in accounting principles or their method of application be to a preferable principle and that the nature and impact of the change be adequately disclosed. When a material change occurs, the auditor should modify the report by adding an explanatory paragraph after the opinion paragraph to discusses the nature of the change and points the reader to the footnote that discusses the change. b. Where is this paragraph located in the report? It is located after the opinion paragraph c. What type of opinion was issued on the financial statements – standard unqualified, unqualified with explanatory paragraph or modified wording, qualified, adverse, disclaimer? Unqualified with explanatory paragraph 3. Find Borders Group, Inc.’s 2011 10-K filing on the SEC