Analysis and Audit Plan Spring 2013

Analysis and Audit
Plan
Spring 2013
(Mohawk Industries)
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 different steps in the audit process.
3. To allow students to experience writing
as is done in an actual business/audit setting.

Logistics:

1. The final paper should be professionally
presented in a report binder.
2. Double space the paper
3. Use Times Roman 12 font
4. There
is not a required length. However, most papers generally run about 8 pages in
length. The paper should not exceed 10
pages.

Detailed Instructions:

1.
Obtain
a copy of a recent annual report of 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:
·
Sales
·
Assets
·
Employees

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.
Answer the following
questions:

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. Answer the
following questions:

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?