Audit Strategy Memorandum

Purpose: This audit strategy is intended to provide our responses to the risks identified for [Apple Inc.] and generally detail the associated tests of controls and substantive procedures that will be required during the audit.

Background: This is a company that specializes in building and selling technology such as the iPhone and Macintosh. This is one of the more popular companies in the world since just about everybody ether owns a Samsung or an Apple product as a way to communicate with one another. Apple Inc. has been founded by Steve Jobs and now is led by Tim Cook. This is a highly successful company and is very diverse with the type of products they offer.

Issue(s): The following issues are taken from the SEC 10k form of Apple Inc.

Global and regional economic conditions could materially adversely affect the Company.

Global markets for the Companys products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.

To remain competitive and stimulate customer demand, the Company must successfully manage frequent product introductions and transitions.

The Company depends on the performance of distributors, carriers and other resellers.

The Company faces substantial inventory and other asset risk in addition to purchase commitment cancellation risk.

Future operating results depend upon the Companys ability to obtain components in sufficient quantities on commercially reasonable terms.

The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of which are located outside of the U.S.

The Companys products and services may experience quality problems from time to time that can result in decreased sales and operating margin and harm to the Companys reputation.

The Company relies on access to third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.

The Companys future performance depends in part on support from third-party software developers.

The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at all.

The Company could be impacted by unfavorable results of legal proceedings, such as being found to have infringed on intellectual property rights.

The Company is subject to laws and regulations worldwide, changes to which could increase the Companys costs and individually or in the aggregate adversely affect the Companys business.

The Companys business is subject to the risks of international operations.

The Companys retail stores have required and will continue to require a substantial investment and commitment of resources and are subject to numerous risks and uncertainties.

Investment in new business strategies and acquisitions could disrupt the Companys ongoing business and present risks not originally contemplated.

The Companys business and reputation may be impacted by information technology system failures or network disruptions.

There may be losses or unauthorized access to or releases of confidential information, including personally identifiable information, that could subject the Company to significant reputational, financial, legal and operational consequences.

The Companys business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding data protection.

The Companys success depends largely on the continued service and availability of key personnel.

The Companys business may be impacted by political events, war, terrorism, public health issues, natural disasters and other business interruptions.

The Company expects its quarterly revenue and operating results to fluctuate.

The Companys stock price is subject to volatility.

The Companys financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local currencies.

The Company is exposed to credit risk and fluctuations in the market values of its investment portfolio.

The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments related to long-term supply agreements, and this risk is heightened during periods when economic conditions worsen.

The Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.

Guidance: Discuss the assertions, test of controls and substantive procedures that you recommend that is consistent with the purpose of the audit strategy.

Conclusion: Discuss the audit approach that you recommend taking. Use the audit approach paragraph as outlined in Appendix B as a guide. Be careful not to restate this paragraph verbatim. You need to be creative to tailor your audit approach for your situation.

https://www.sec.gov/Archives/edgar/data/320193/000032019317000070/a10-k20179302017.htm#s2580FABA87865BC3AA85349AC36B2144

Please fill in the Guidance and Conclusion for this exercise. Thank you very much!

4.65 Audit Strategy Memorandum. The auditor should establish an overall audit strategy that sets the scope, timing, and direction of the audit and guides the development of the audit plan. In establishing the overall audit strategy, the auditor should develop and document an audit plan that includes a description of (a) the planned nature, timing, and extent of the risk assessment procedures, (b) the planned nature, timing, and extent of tests of controls and substantive procedures, and (c) other planned audit procedures that must be performed so that the engagement complies with auditing standards. LO 4-7 Required: Select a public company and determine a significant risk that could affect its financial statements. (Hint: Go to the EDGAR database at www.sec.gov and select the company's form 10-K. The 10-K will have a list of risk factors the company faces). Describe the risk and how it could affect the financial statements, including what assertions might be misstated. Prepare an audit strategy memorandum for the risk describing what controls the company might use to mitigate the risk, how you could test the controls, and what substantive procedures you might use to determine whether there is a misstatement Because this is early in your auditing class, do not worry about specific procedures; just be creative and think about a general strategy an auditor might use