The 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 certain steps in the audit process.
3. To allow students to experience working in teams, as is done in actual auditing.
Form a group of four persons. Discuss how you will organize (assign responsibilities) to complete this project in a suitable format.
Obtain a copy of a recent annual report of a publicly held company with stock actively traded on the New York, NASDAQ or other over-the-counter exchanges.
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?