Hello, you helped me on pat of this paper back in April which was the financial statements part of it. I need some adjustments make to the attached papers. Thanks

In regards to the financial statements, I need a discussion on how the financial statements wuld differ under IFRS and GAAP

For the audit sample, this was the feedback from the professor: Your risk analysis was OK, but weak at best - Although you did mention briefly the PCAOB and SOX, you really did not discuss how they both changed the auditing profession. Additionally, your audit plan really was not a plan at all but merely a couple of sentences. You did not tell the reader what and how you were going to accomplish

RUNNING HEAD: FINANCIAL ANALYSIS 1 Vertical Analysis Balance Sheet During the analysis, it is evident that the total current assets of the Chester, Inc. have increased marginally from 97.35% of total assets in the year 2013 to 97.56% during the fiscal year 2015. The two major contributors to total current assets out of total assets are accounts receivables and inventory. Accounts receivables increased from 40.94% to 42.03% of total assets from the year 2013 to year 2015 and inventory increased from 46.96% to 56.56% of the total assets. The investments decreased from 13.84% to 5.98% of total assets from the fiscal year 2013 to 2015. Machinery, equipment and office furniture has been doubled from 2013 to 2015 and stood at 2.81% to 1.08% of total assets. Building and land improvements decreased from 1.56% to 0.71% of total assets during the period of analysis. Total current liabilities increased significantly and stood at 54.85% of total assets in the fiscal year 2013 to 71.54% of total assets in the fiscal year 2015. The main reason this increase in current liabilities is the increase in line of credit, which increased from 24.94% to 40.69% of total assets during 2013 to 2015. However, accounts payable decreased from 17.83% to 11.01% of the total assets during the period of analysis. There were no long-term notes payable during in the year 2013, but they were increased from 0% to 10.32% of total assets during the fiscal year 2015. Total stockholder's equity decreased to 18.14% from 45.15% of the total assets from financial year 2013 to financial year 2015. Income Statement The cost of goods sold of Chester Inc. has been an increasing trend as it has been increased from 58.58% to 67.39% of the total net sales during the financial year 2013 to financial year 2015. Because of this increase in cost of goods sold, the gross profit has decreased from 41.42% to 32.61% of total net sales during the period 2013 to 2015. Expenses for Administrative wages has been increased, which increases to 7.41% during the year 2015 as compared to 6.98% during the year 2013. Research and development expenses reduced significantly and dropped to 1.16% of net sales from 12.79% of net sales during the period of analysis. Total expenses dropped from 30.12% to 25.47% of net sales from Financial Analysis 2 2013 to 2015. The Net operating income of Chester Inc. has been increased during the financial year 2014 and stood at 15.34% of net sales as compared to 11.30% during the financial year 2013, but got decreased in the year 2015 and stood at 7.13%. The net income during the fiscal year 2013 was 2.13% which increased to 7.90% during the fiscal year 2014. The net income again decreased and stood at 3.13% of revenue during the fiscal year 2015. Horizontal Analysis Balance Sheet The total current assets of Chester, Inc. has increased to 165.73% during the year 2014 but decreased during the year 2015 by 12.18%. The factor contributing the increase in total current assets during the financial year 2014 was due to increase in inventory and accounts receivable. Total fixed assets for Chester Inc. also increased during the financial year 2014 by 165.31%, but got decreased during the financial year 2015 and stood at 12.24%. The factor for such increase was increase in machinery, equipment and office equipment during the financial year 2014, which stood at 505.81%. Total current liabilities also increased significantly during the financial year 2014 to 235.90% whereas they decreased during the financial year 2015 by 9.60%. The increase in the total current liabilities during the financial year 2014 was primarily due to increase in line of credit and dividend payable. Total liabilities increased to 282.33% during the financial year 2014 whereas reduced to 9.12% during the financial year 2015. Total stockholder's equity also increased by 23.14% during the fiscal year 2014 whereas decreased by 24.01% during the fiscal year 2015. Income Statement Net sale of the Chester, Inc. decreased during the fiscal year 2014 by 14.13% whereas it increased during the fiscal year 2015 by 2.45%. The cost of goods sold increased significantly during the fiscal year 2015 by 11.22%. Owing to increase in the cost of goods sold the gross profit decreased by 11.91% during the fiscal year 2015. Bad debts expenses increased by 189.71% during the fiscal year 2014 and 136.59% during the fiscal year 2015. Depreciation expenses increased by 249.54% during the Financial Analysis 3 fiscal year 2014 and by 6.20% during the fiscal year 2015. Total expenses decreased by 35.61% during the fiscal year 2014 whereas during the fiscal year 2016 the total expenses increased by 15.54%. The interest expense of the company also increased significantly by 208.39% during the fiscal year 2014 but decreased by 12.78% during the fiscal year 2015. Net income increased by 218.04% during the fiscal year 2014 whereas decreased by 59.43% during the fiscal year 2015. Analysis of Ratios Liquidity Ratios Current Ratio: Current ratio measures the ability of the business to pay its short-term business obligations using its current assets. This ratio of Chester, Inc. has shown a decreasing trend, as the current ratio decreased from 1.77 times during the financial year 2013 to 1.36 times during the financial year 2015. The ratio for industry and Under Armour stood at 3.13 and 3.03 respectively which indicate that the competitor and other peers of industry are having a higher ability than Chester, Inc. to pay its current liabilities from its current assets. Quick Ratio: The Quick ratio measures the ability of the business in paying its short-term business obligations using its quick assets. Quick assets are those which can be easily converted in to cash. This ratio of Chester, Inc. has also shown a decreasing trend and the ratio decreased from 0.98 times during the financial year 2013 to 0.67 times during the financial year 2015. Therefore, the ability of Chester Inc. has been decreased to pay its short term obligations and the inefficiency of the company to pay its current liabilities using quick assets. The ratio for industry and Under Armour stood at 1.18 and 0.46 respectively which indicate that the other peers of industry are having a higher ability than Chester, Inc. to pay its current liabilities from its quick assets whereas the ability of Under Armour is low. Working Capital: The working capital is used to run day to day operations of the business. The working capital of Chester, Inc. was $21,294,896 during the financial year 2013 which increased Financial Analysis 4 during the financial year 2014 and stood at $37,297,993. But during the financial year 2015 the working capital decreased significantly and stood at $30,370,058. Solvency Ratios Times Interest Earned: This ratio tells the ability of the company to pay interest obligations on its debts. The ratio of the company has shown a decreasing trend during the period of analysis. The ratio was 10.08 times during the financial year 2013 but improved in the financial year 2014 and stood at 12.01 times. But this ratio decreased significantly during the financial year 2015 and stood at 6.72 times. This means that the company has increased debts during the financial year 2015 as the interest expenditure of Chester Inc. has increased. The ratio of industry stood significantly higher at 27.43 which indicates that other peers of industry have higher ability to pay interest on debts as compared to Chester, Inc. Debt to Equity Ratio: This ratio compares the total debts with respect to total equity of the company. The ratio of Chester, Inc. has been increased during the period of analysis. This ratio has been increased from 0.55 times during the financial year 2013 to 0.82 times during the financial year 2015. This tells that the debts of Chester Inc. have been increased significantly during the period of analysis. A higher ratio tells that assets of Chester Inc. are more financed from outside creditors as compared to assets financed by inside investor. The ratio of industry and Under Armour stood at 0.38 and 0.31 respectively. It indicates that the assets of Chester, Inc. are more financed by outside creditors as compared to industry and competitor. Equity Ratio: This ratio measures total equity of the business with respect to the total assets. The ratio of the Chester Inc. has shown a decreasing trend. The ratio decreased from 0.45 times during the financial year 2013 to 0.18 times in the financial year 2015. It indicates that the equity of the company is less than half of the assets. Profitability Ratios Financial Analysis 5 Gross Profit Ratio: This ratio measures the profitability of the business by selling its inventory or merchandise. The gross profit of the company has shown a decreasing trend during the period of analysis. The ratio decreased from 41.42% during the financial year 2013 to 32.61% during the financial year 2015. This Shows that the ability of the Chester Inc. to generate profitability on its inventory has decreased. The ratio of industry and Under Armour stood at 48.08% and 49.89% which indicates that the competitor and other peers of the industry have a higher gross profit than Chester, Inc. Net Profit Ratio: This ratio measures the amount of net income earned from each dollar of sales generated after paying all the business expenses. The net profit ratio of the Chester, Inc. increased significantly during the financial year 2014 and stood at 7.90% when compared 2.13% during the financial year 2013. But during the fiscal year 2015 the ratio decreased again and stood at 3.13%. It indicates that the ability of Chester Inc. has been decline in generating the net income. The ratio of industry and Under Armour stood at 5.87% and 8.73% respectively which indicates that Chester, Inc. is less profitable than competitors and other players of the industry. Return on Equity: This ratio measures the ability of the business to generate net income from its stockholder's wealth. The ratio of the company was 28.47% during the financial year 2013 which increased to 73.53% during the financial year 2014. But the ratio again decreased during the financial year 2015 and stood at 39.26%. Which means that the shareholders equity has not been utilized efficiently by Chester Inc. The ratio of the industry stood at 15.41% which indicates that Chester, Inc. has made more efficient utilization of its stockholder's wealth as compared to the other peers of the industry. Chester, Inc. Trial Balances for years ending December 31, 2013, 2014 and 2015 Account Description Cash on Hand Checking Account - Operating MMKT Accounts Investments - Trading Accounts Receivable Allowance for Doubtful Accounts Other Receivables Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Other Noncurrent Assets Accounts Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable State Payroll Taxes Payable FICA Employer Withholding Medicare Employer Withholding Income Taxes Receivable/Payable Line of Credit Current Portion LT Note Payable Interest payable Bonuses payable Dividend payable Long-Term Note Payable Common Stock Paid-in Capital Retained Earnings (Beginning Balance) Dividends Sales Sales Returns Income from Investments Unrealized (Gains) and Losses - Investments Interest Income Cost of Goods Sold Administrative Wages Expense Advertising Expense Auto Expenses Bad Debt Expense Bonus Expense Depreciation Expense Freight Insurance Expense Legal and Professional Expense Maintenance Expense Miscellaneous Office Expense Payroll Tax Expense Pension/Profit-Sharing Plan Ex Phone Postal Property Tax Expense Rent or Lease Expense Research and Development Utilities Warehouse Salaries Warranty Expense Interest Expense Income Tax Expense - Federal Income Tax Expense - State Loss on Legal Settlement 2015 $2,511 243,892 1,205,563 6,978,923 49,042,528 (2,942,552) 1,200,000 65,990,780 (10,558,525) 2,667,722 9,182 131,040 833,775 3,280,589 (1,403,257) (12,850,648) (198,384) (7,089) (9,589) (99,192) (46,200) (7,089) (9,589) (6,011,540) (47,481,737) (721,480) (568,429) (459,000) (15,000,000) (12,040,880) (10,131,250) (9,278,750) (8,449,935) 15,000,000 (288,876,206) 23,110,096 (549,387) (128,725) (142,168) 179,103,248 19,706,506 1,058,391 214,001 13,900,800 459,000 617,155 4,325,068 951,774 8,987,069 87,641 25,390 1,609,342 3,366,000 53,651 79,360 101,319 2,230,615 3,080,313 155,600 5,270,689 1,422,381 2,942,147 7,269,540 1,258,000 0 2014 2013 $2,459 $2,483 252,858 247,646 983,161 806,288 6,850,198 6,935,712 56,472,091 20,513,628 (2,387,691) (1,578,525) 1,400,000 0 75,351,471 23,531,507 (12,136,103) (3,765,000) 2,830,474 1,829,143 250,000 9,565 9,259 131,040 146,250 698,775 779,882 3,280,589 541,522 (786,102) (205,000) 67,301 (19,488,866) (8,934,591) (264,513) (36,838) (9,452) (1,648) (12,785) (730) (132,256) (7,541) (61,630) (3,519) (9,452) (1,648) (12,785) (730) (3,205,440) 0 (52,231,360) (12,500,000) (677,640) 0 (470,311) 0 (504,000) 0 (15,250,000) (6,000,000) (12,762,360) (10,131,250) (10,131,250) (9,278,750) (9,278,750) (3,214,851) (2,773,900) 15,250,000 6,000,000 (271,839,067) (307,716,148) 12,432,247 5,621,979 (658,672) (665,079) 85,514 64,288 (147,707) (255,379) 161,029,981 176,961,437 18,344,399 21,094,132 1,161,276 1,121,425 235,763 261,218 5,875,403 2,028,032 504,000 0 581,102 166,250 4,749,095 5,378,689 1,045,085 1,067,428 11,037,039 4,506,417 96,020 76,420 27,803 21,279 1,767,149 1,938,736 3,696,000 3,750,000 57,911 95,467 87,140 160,042 110,252 100,619 1,370,273 3,254,357 532,425 38,639,554 170,765 169,554 5,848,120 5,791,730 1,297,104 1,375,352 3,373,056 1,093,750 14,142,240 2,956,250 2,503,200 536,250 23,965,000 0 0 Increase /(Decrease) 2014 2015 (85,514) 35,149,297 128,725 (7,984,424) 1,400,000 43,448,861 (200,000) (7,783,113) 1,001,331 (250,000) 306 (162,752) (383) 10,554,275 227,675 7,804 12,055 124,715 58,111 7,804 12,055 3,205,440 39,731,360 677,640 470,311 504,000 9,250,000 (6,638,218) (66,129) (2,363) (3,196) (33,064) (15,430) (2,363) (3,196) 2,806,100 (4,749,623) 43,840 98,118 (45,000) (250,000) 35,958,463 809166 35,149,297 51,819,964 8371103 43,448,861 (7,429,563) 554861 (7,984,424) Use this worksheet to prepare a Multi-step Income Statement to include EPS Check Figures: 2015 Net Income 2014 Gross Profit 2013 Total Expenses Chester, Inc. Income Statement For the Year Ending December 31, 2015 Revenue: Sales Less: Sales Return Net sales Less: Cost of Goods Sold Gross Profit Less: Expenses Administrative Wages Expense Advertising Expense Auto Expenses Bad Debt Expense Bonus Expense Depreciation Expense Freight Insurance Expense Legal and Professional Expense Maintenance Expense Miscellaneous Office Expense Payroll Tax Expense Pension/Profit-Sharing Plan Ex Phone Postal Property Tax Expense Rent or Lease Expense Research and Development Utilities Warehouse Salaries Warranty Expense Total Expenses Net Operating Income Add: Other Income Income from Investments Interest Income 2014 288,876,206 23,110,096 265,766,110 271,839,067 12,432,247 259,406,820 179,103,248 86,662,862 161,029,981 98,376,839 19,706,506 1,058,391 214,001 13,900,800 459,000 617,155 4,325,068 951,774 8,987,069 87,641 25,390 1,609,342 3,366,000 53,651 79,360 101,319 2,230,615 3,080,313 155,600 5,270,689 18,344,399 1,161,276 235,763 5,875,403 504,000 581,102 4,749,095 1,045,085 11,037,039 96,020 27,803 1,767,149 3,696,000 57,911 87,140 110,252 1,370,273 532,425 170,765 5,848,120 1,422,381 1,297,104 67,702,065 18,960,797 58,594,124 39,782,715 678,112 142,168 573,158 147,707 Less: Other Expenses Interest Expense 2,942,147 3,373,056 16,838,930 37,130,524 Income Tax Expense - Federal 7,269,540 14,142,240 Income Tax Expense - State 1,258,000 2,503,200 Net Income 8,311,390 20,485,084 Loss on Legal Settlement Net Income Before Income Tax Less: Income Tax Expenses $ $ $ 8,311,390 98,376,839 90,996,701 1, 2013 307,716,148 5,621,979 302,094,169 176,961,437 125,132,732 21,094,132 1,121,425 261,218 2,028,032 166,250 5,378,689 1,067,428 4,506,417 76,420 21,279 1,938,736 3,750,000 95,467 160,042 100,619 3,254,357 38,639,554 169,554 5,791,730 1,375,352 90,996,701 34,136,031 600,791 255,379 1,093,750 23,965,000 9,933,451 2,956,250 536,250 6,440,951 Use this worksheet to complete a Statement of Retained Earnings Check Figures: 2015 Shareholders' Equity $ 21,171,325 2014 Shareholders' Equity $ 27,859,935 2013 Shareholders' Equity $ 22,624,851 Chester, Inc. Statement of Retained Earnings for years ending December 31, 2015 Opening balance Add: Net income during the year Less: Dividend Closing balance 2014 2013 8,449,935 8,311,390 3,214,851 20,485,084 2,773,900 6,440,951 15,000,000 15,250,000 6,000,000 1,761,325 8,449,935 3,214,851 Chester, Inc. Shareholder's Equity As on December 31, 2015 2014 2013 Common Stock Paid-in Capital 10,131,250 9,278,750 10,131,250 9,278,750 10,131,250 9,278,750 Retained Earnings Total Stockholder's Equity 1,761,325 21,171,325 8,449,935 27,859,935 3,214,851 22,624,851 Use this worksheet to complete a Classified Balance Sheet . Check Figures: 2015 Total Current Assets 2014 Current Liabilities 2103 Total Assets $ $ $ 113,840,024 92,330,490 50,112,096 Chester, Inc. Balance Sheet As on December 31, 2015 2014 2013 Assets Current assets: Cash on Hand Checking Account - Operating MMKT Accounts Accounts Receivable Other Receivables Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies 2,511 243,892 1,205,563 49,042,528 1,200,000 (2,942,552) 65,990,780 (10,558,525) 2,667,722 9,182 2,459 252,858 983,161 56,472,091 1,400,000 (2,387,691) 75,351,471 (12,136,103) 2,830,474 9,565 2,483 247,646 806,288 20,513,628 (1,578,525) 23,531,507 (3,765,000) 1,829,143 250,000 9,259 Investments - Trading 6,978,923 113,840,024 6,850,198 129,628,483 6,935,712 48,782,141 131,040 833,775 3,280,589 (1,403,257) - 131,040 698,775 3,280,589 (786,102) - 146,250 779,882 541,522 (205,000) 67,301 2,842,147 3,324,302 1,329,955 116,682,171 132,952,785 50,112,096 12,850,648 198,384 7,089 9,589 99,192 46,200 7,089 9,589 19,488,866 264,513 9,452 12,785 132,256 61,630 9,452 12,785 8,934,591 36,838 1,648 730 7,541 3,519 1,648 730 Total current assets Fixed assets: Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Other Noncurrent Assets Total fixed assets Total Assets Liabilities Current liabilities: Accounts Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable State Payroll Taxes Payable FICA Employer Withholding Medicare Employer Withholding Income Taxes Receivable/Payable Line of Credit Current Portion Long-Term Debt Interest payable Bonuses payable Dividend payable 6,011,540 47,481,737 721,480 568,429 459,000 15,000,000 83,469,966 3,205,440 52,231,360 677,640 470,311 504,000 15,250,000 92,330,490 Long Term Notes Payable 12,040,880 12,762,360 Total Long Term Liabilities Total Liabilities Stockholder's Equity 12,040,880 95,510,846 12,762,360 105,092,850 27,487,245 Common Stock Paid-in Capital Retained Earnings 10,131,250 9,278,750 1,761,325 10,131,250 9,278,750 8,449,935 10,131,250 9,278,750 3,214,851 Total Stockholder's Equity Total liabilities and Stockholder's Equity 21,171,325 27,859,935 22,624,851 116,682,171 132,952,785 50,112,096 Total current liabilities Long Term Liabilities: 12,500,000 6,000,000 27,487,245 - Use this Worksheet to complete a Statement of Cash Flows 2015 Net Cash from Operating Activities 2014 Net Cash from Investing Activities 2015 Net Increase (Decrease) in Cash Check Figures: $ 20,775,751 $ (2,575,449) $ 213,488 Chester, Inc. Statement of Cash flows For the Year Ending December 31, 2015 Cash flows from operating activities Net profit Add/Less: Depreciation Expense Investment - Trading Accounts Receivable Other Receivables Inventory Prepaid Insurance Prepaid Rent Office Supplies Accounts Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable State Payroll Taxes Payable FICA Employer Withholding Medicare Employer Withholding Income Taxes Receivable/Payable Interest payable Bonuses payable Dividend payable Net cash flows from operating activities 8,311,390 617,155 (128,725) 7,984,424 200,000 7,783,113 162,752 383 (6,638,218) (66,129) (2,363) (3,196) (33,064) (15,430) (2,363) (3,196) 2,806,100 98,118 (45,000) (250,000) 20,775,751 Cash flow from investing activities Purchases of Machinery, Equipment, Office Furniture Purchases of Buildings and Land Improvements Sale Proceeds of Other Non Current Assets Sale Proceeds of (135,000) - Sale Proceeds of land (135,000) Net Cash flow from investing activities Cash flows from financing activities Dividend Paid Long Term Notes Payable Repayment of Long Term Notes Payable (15,000,000) (721,480) Line of Credit Current Portion LT Note Payable Net Cash flows from financing activities Net changes in cashflows during the year Opening balance Closing balance (4,749,623) 43,840 (20,427,263) 213,488 1,238,478 1,451,966 2014 20,485,084 581,102 85,514 (35,149,297) (1,400,000) (43,448,861) (1,001,331) 250,000 (306) 10,554,275 227,675 7,804 12,055 124,715 58,111 7,804 12,055 3,205,440 470,311 504,000 9,250,000 (35,163,850) (2,739,067) 67,301 81,107 15,210 (2,575,449) (15,250,000) 12,762,360 - 39,731,360 677,640 37,921,360 182,061 1,056,417 1,238,478 Vertical Analysis of Balance Sheet Chester, Inc. Balance Sheet . Assets 2015 Amount 2014 Amount % Current assets: Cash on Hand Checking Account - Operating MMKT Accounts Accounts Receivable Other Receivables Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies 2,511 243,892 1,205,563 49,042,528 1,200,000 (2,942,552) 65,990,780 (10,558,525) 2,667,722 9,182 0.00% 0.21% 1.03% 42.03% 1.03% -2.52% 56.56% -9.05% 2.29% 0.00% 0.01% 2,459 252,858 983,161 56,472,091 1,400,000 (2,387,691) 75,351,471 (12,136,103) 2,830,474 9,565 Investments - Trading 6,978,923 113,840,024 5.98% 97.56% 6,850,198 129,628,483 131,040 833,775 3,280,589 (1,403,257) 0.11% 0.71% 2.81% -1.20% 131,040 698,775 3,280,589 (786,102) Total current assets Fixed assets: Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Other Noncurrent Assets Total fixed assets - 0.00% - 2,842,147 2.44% 3,324,302 Total Assets Liabilities Current liabilities: 116,682,171 100.00% 132,952,785 Accounts Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable State Payroll Taxes Payable FICA Employer Withholding Medicare Employer Withholding Income Taxes Receivable/Payable Line of Credit Current Portion Long-Term Debt Interest payable 12,850,648 198,384 7,089 9,589 99,192 46,200 7,089 9,589 6,011,540 47,481,737 721,480 568,429 11.01% 0.17% 0.01% 0.01% 0.09% 0.04% 0.01% 0.01% 5.15% 40.69% 0.62% 0.49% 19,488,866 264,513 9,452 12,785 132,256 61,630 9,452 12,785 3,205,440 52,231,360 677,640 470,311 Bonuses payable 459,000 0.39% 504,000 Dividend payable 15,000,000 83,469,966 12.86% 71.54% 0.00% 15,250,000 92,330,490 Long Term Notes Payable 12,040,880 10.32% 12,762,360 Total Long Term Liabilities Total Liabilities Stockholder's Equity 12,040,880 95,510,846 10.32% 81.86% 12,762,360 105,092,850 Common Stock Paid-in Capital 10,131,250 9,278,750 8.68% 7.95% 10,131,250 9,278,750 1,761,325 1.51% 8,449,935 21,171,325 18.14% 27,859,935 116,682,171 100.00% 132,952,785 Total current liabilities Long Term Liabilities: Retained Earnings Total Stockholder's Equity Total liabilities and Stockholder's Equity 2013 Amount % % 0.00% 0.19% 0.74% 42.48% 1.05% -1.80% 56.68% -9.13% 2.13% 0.00% 0.01% 2,483 247,646 806,288 20,513,628 (1,578,525) 23,531,507 (3,765,000) 1,829,143 250,000 9,259 0.00% 0.49% 1.61% 40.94% 0.00% -3.15% 46.96% -7.51% 3.65% 0.50% 0.02% 5.15% 97.50% 6,935,712 48,782,141 13.84% 97.35% 0.10% 0.53% 2.47% -0.59% 146,250 779,882 541,522 (205,000) 0.29% 1.56% 1.08% -0.41% 0.00% 67,301 0.13% 2.50% 1,329,955 2.65% 100.00% 50,112,096 100.00% 14.66% 0.20% 0.01% 0.01% 0.10% 0.05% 0.01% 0.01% 2.41% 39.29% 0.51% 0.35% 8,934,591 36,838 1,648 730 7,541 3,519 1,648 730 12,500,000 - 17.83% 0.07% 0.00% 0.00% 0.02% 0.01% 0.00% 0.00% 0.00% 24.94% 0.00% 0.00% 0.38% 11.47% 69.45% 0.00% 9.60% 6,000,000 27,487,245 - 0.00% 11.97% 54.85% 0.00% 0.00% 9.60% 79.05% 27,487,245 0.00% 54.85% 7.62% 6.98% 10,131,250 9,278,750 20.22% 18.52% 6.36% 3,214,851 6.42% 20.95% 22,624,851 45.15% 100.00% 50,112,096 100.00% Horizontal Analysis of Balance Sheet Assets 2015 Amount Chester, Inc. Balance Sheet As on December 31, Increase (Decrease) 2014 Amount Current assets: Cash on Hand Checking Account - Operating MMKT Accounts Accounts Receivable Other Receivables Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies 2,511 243,892 1,205,563 49,042,528 1,200,000 (2,942,552) 65,990,780 (10,558,525) 2,667,722 9,182 2,459 252,858 983,161 56,472,091 1,400,000 (2,387,691) 75,351,471 (12,136,103) 2,830,474 9,565 52 (8,966) 222,402 (7,429,563) (200,000) (554,861) (9,360,691) 1,577,578 (162,752) (383) Investments - Trading 6,978,923 113,840,024 6,850,198 129,628,483 128,725 (15,788,459) 131,040 833,775 3,280,589 (1,403,257) 131,040 698,775 3,280,589 (786,102) 135,000 (617,155) Total current assets Fixed assets: Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Other Noncurrent Assets Total fixed assets Total Assets Liabilities Current liabilities: Accounts Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable State Payroll Taxes Payable FICA Employer Withholding Medicare Employer Withholding Income Taxes Receivable/Payable Line of Credit Current Portion Long-Term Debt Interest payable - - - 2,842,147 3,324,302 (482,155) 116,682,171 132,952,785 (16,270,614) 12,850,648 198,384 7,089 9,589 99,192 46,200 7,089 9,589 6,011,540 47,481,737 721,480 568,429 19,488,866 264,513 9,452 12,785 132,256 61,630 9,452 12,785 3,205,440 52,231,360 677,640 470,311 (6,638,218) (66,129) (2,363) (3,196) (33,064) (15,430) (2,363) (3,196) 2,806,100 (4,749,623) 43,840 98,118 Bonuses payable 459,000 504,000 (45,000) Dividend payable 15,000,000 83,469,966 15,250,000 92,330,490 (250,000) (8,860,524) Long Term Notes Payable 12,040,880 12,762,360 (721,480) Total Long Term Liabilities Total Liabilities Stockholder's Equity 12,040,880 95,510,846 12,762,360 105,092,850 (721,480) (9,582,004) Common Stock Paid-in Capital 10,131,250 9,278,750 10,131,250 9,278,750 1,761,325 8,449,935 (6,688,610) 21,171,325 27,859,935 (6,688,610) 116,682,171 132,952,785 (16,270,614) Total current liabilities Long Term Liabilities: Retained Earnings Total Stockholder's Equity Total liabilities and Stockholder's Equity - Chester, Inc. Balance Sheet on December 31, 2015 2014 Amount % 2013 Amount Increase (Decrease) 2014 % 2.11% -3.55% 22.62% -13.16% -14.29% 23.24% -12.42% -13.00% -5.75% 0.00% -4.00% 2,459 252,858 983,161 56,472,091 1,400,000 (2,387,691) 75,351,471 (12,136,103) 2,830,474 9,565 2,483 247,646 806,288 20,513,628 (1,578,525) 23,531,507 (3,765,000) 1,829,143 250,000 9,259 (24) 5,212 176,873 35,958,463 1,400,000 (809,166) 51,819,964 (8,371,103) 1,001,331 (250,000) 306 -0.97% 2.10% 21.94% 175.29% 0.00% 51.26% 220.22% 222.34% 54.74% -100.00% 3.30% 1.88% -12.18% 6,850,198 129,628,483 131,040 698,775 3,280,589 (786,102) 6,935,712 48,782,141 (85,514) 80,846,342 -1.23% 165.73% 146,250 779,882 541,522 (205,000) (15,210) (81,107) 2,739,067 (581,102) -10.40% -10.40% 505.81% 283.46% 67,301 (67,301) -100.00% 0.00% 19.32% 0.00% 78.51% 0.00% - -14.50% 3,324,302 1,329,955 1,994,347 149.96% -12.24% 132,952,785 19,488,866 264,513 9,452 12,785 132,256 61,630 9,452 12,785 3,205,440 52,231,360 677,640 470,311 50,112,096 82,840,689 165.31% 8,934,591 36,838 1,648 730 7,541 3,519 1,648 730 12,500,000 - 10,554,275 227,675 7,804 12,055 124,715 58,111 7,804 12,055 3,205,440 39,731,360 677,640 470,311 118.13% 618.04% 473.54% 1651.37% 1653.83% 1651.35% 473.54% 1651.37% 0.00% 317.85% 0.00% 0.00% -34.06% -25.00% -25.00% -25.00% -25.00% -25.04% -25.00% -25.00% 87.54% -9.09% 6.47% 20.86% -8.93% 504,000 - -1.64% -9.60% 15,250,000 92,330,490 - -5.65% 12,762,360 -5.65% -9.12% 27,487,245 0.00% 0.00% 12,762,360 105,092,850 10,131,250 9,278,750 -79.16% 8,449,935 3,214,851 5,235,084 162.84% -24.01% 27,859,935 22,624,851 5,235,084 23.14% -12.24% 132,952,785 50,112,096 82,840,689 165.31% 6,000,000 27,487,245 - 10,131,250 9,278,750 504,000 0.00% 9,250,000 64,843,245 154.17% 235.90% 12,762,360 0.00% 12,762,360 77,605,605 0.00% 282.33% - 0.00% 0.00% Complete a Horizontal and Vertical Analysis of the Income Statement in this worksheet. Vertical Analysis of Income statement Chester, Inc. Income Statement For the Year Ending December 31, Revenue: Sales Less: Sales Return Net sales Less: Cost of Goods Sold Gross Profit Less: Expenses Administrative Wages Expense Advertising Expense Auto Expenses Bad Debt Expense Bonus Expense Depreciation Expense Freight Insurance Expense Legal and Professional Expense Maintenance Expense Miscellaneous Office Expense Payroll Tax Expense Pension/Profit-Sharing Plan Ex Phone Postal Property Tax Expense Rent or Lease Expense Research and Development Utilities Warehouse Salaries Warranty Expense Total Expenses Net Operating Income Add: Other Income Income from Investments Interest Income Less: Other Expenses Interest Expense Loss on Legal Settlement Net Income Before Income Tax Less: Income Tax Expenses Income Tax Expense - Federal Income Tax Expense - State Net Income ter, Inc. Statement ding December 31, 2015 Amount 2014 Amount 2013 Amount % 288,876,206 108.70% % 271,839,067 104.79% % 307,716,148 101.86% (23,110,096) -8.70% 265,766,110 100.00% (12,432,247) -4.79% 259,406,820 100.00% (5,621,979) -1.86% 302,094,169 100.00% 179,103,248 67.39% 86,662,862 32.61% 161,029,981 62.08% 98,376,839 37.92% 176,961,437 125,132,732 58.58% 41.42% 19,706,506 1,058,391 214,001 13,900,800 459,000 617,155 4,325,068 951,774 8,987,069 87,641 25,390 1,609,342 3,366,000 53,651 79,360 101,319 2,230,615 3,080,313 155,600 5,270,689 7.41% 0.40% 0.08% 5.23% 0.17% 0.23% 1.63% 0.36% 3.38% 0.03% 0.01% 0.61% 1.27% 0.02% 0.03% 0.04% 0.84% 1.16% 0.06% 1.98% 18,344,399 1,161,276 235,763 5,875,403 504,000 581,102 4,749,095 1,045,085 11,037,039 96,020 27,803 1,767,149 3,696,000 57,911 87,140 110,252 1,370,273 532,425 170,765 5,848,120 7.07% 0.45% 0.09% 2.26% 0.19% 0.22% 1.83% 0.40% 4.25% 0.04% 0.01% 0.68% 1.42% 0.02% 0.03% 0.04% 0.53% 0.21% 0.07% 2.25% 21,094,132 1,121,425 261,218 2,028,032 166,250 5,378,689 1,067,428 4,506,417 76,420 21,279 1,938,736 3,750,000 95,467 160,042 100,619 3,254,357 38,639,554 169,554 5,791,730 6.98% 0.37% 0.09% 0.67% 0.00% 0.06% 1.78% 0.35% 1.49% 0.03% 0.01% 0.64% 1.24% 0.03% 0.05% 0.03% 1.08% 12.79% 0.06% 1.92% 1,422,381 0.54% 1,297,104 0.50% 1,375,352 0.46% 58,594,124 22.59% 39,782,715 15.34% 90,996,701 34,136,031 30.12% 11.30% 67,702,065 25.47% 18,960,797 7.13% 678,112 142,168 0.26% 0.05% 573,158 147,707 0.22% 0.06% 600,791 255,379 0.20% 0.08% 2,942,147 1.11% 3,373,056 1.30% 1,093,750 0.36% 0.00% 23,965,000 7.93% - 0.00% - 16,838,930 6.34% 37,130,524 14.31% 9,933,451 3.29% 7,269,540 2.74% 14,142,240 5.45% 2,956,250 0.98% 1,258,000 0.47% 2,503,200 0.96% 536,250 0.18% 8,311,390 3.13% 20,485,084 7.90% 6,440,951 2.13% Horizontal Analysis of Income statement Chester, Inc. Income Statement For the Year Ending December 31, 2014 2015 Increase (Decrease) % 2015 Revenue: Sales Less: Sales Return Net sales Less: Cost of Goods Sold Gross Profit Less: Expenses Administrative Wages Expense Advertising Expense Auto Expenses Bad Debt Expense Bonus Expense Depreciation Expense Freight Insurance Expense Legal and Professional Expense Maintenance Expense Miscellaneous Office Expense Payroll Tax Expense Pension/Profit-Sharing Plan Ex Phone Postal Property Tax Expense Rent or Lease Expense Research and Development Utilities Warehouse Salaries Warranty Expense Total Expenses Net Operating Income Add: Other Income Income from Investments Interest Income 288,876,206 271,839,067 17,037,139 6.27% (23,110,096) 265,766,110 (12,432,247) 259,406,820 (10,677,849) 6,359,290 85.89% 2.45% 179,103,248 86,662,862 161,029,981 98,376,839 18,073,267 11.22% (11,713,977) -11.91% 19,706,506 1,058,391 214,001 13,900,800 459,000 617,155 4,325,068 951,774 8,987,069 87,641 25,390 1,609,342 3,366,000 53,651 79,360 101,319 2,230,615 3,080,313 155,600 5,270,689 18,344,399 1,161,276 235,763 5,875,403 504,000 581,102 4,749,095 1,045,085 11,037,039 96,020 27,803 1,767,149 3,696,000 57,911 87,140 110,252 1,370,273 532,425 170,765 5,848,120 1,362,107 7.43% (102,885) -8.86% (21,762) -9.23% 8,025,397 136.59% (45,000) -8.93% 36,053 6.20% (424,027) -8.93% (93,311) -8.93% (2,049,970) -18.57% (8,379) -8.73% (2,413) -8.68% (157,807) -8.93% (330,000) -8.93% (4,260) -7.36% (7,780) -8.93% (8,933) -8.10% 860,342 62.79% 2,547,888 478.54% (15,165) -8.88% (577,431) -9.87% 1,422,381 1,297,104 67,702,065 18,960,797 58,594,124 39,782,715 678,112 142,168 573,158 147,707 2,942,147 3,373,056 125,277 9.66% 9,107,941 15.54% (20,821,918) -52.34% 104,954 (5,539) 18.31% -3.75% Less: Other Expenses Interest Expense Loss on Legal Settlement - - (430,909) -12.78% - 0.00% Net Income Before Income Tax Less: Income Tax Expenses 16,838,930 37,130,524 (20,291,594) -54.65% Income Tax Expense - Federal 7,269,540 14,142,240 (6,872,700) -48.60% Income Tax Expense - State 1,258,000 2,503,200 (1,245,200) -49.74% Net Income 8,311,390 20,485,084 (12,173,694) -59.43% ber 31, 2014 2013 Increase (Decrease) 2014 % 271,839,067 307,716,148 (35,877,081) (12,432,247) 259,406,820 (5,621,979) 302,094,169 (6,810,268) 121.14% (42,687,349) -14.13% 161,029,981 98,376,839 18,344,399 1,161,276 235,763 5,875,403 504,000 581,102 4,749,095 1,045,085 11,037,039 96,020 27,803 1,767,149 3,696,000 57,911 87,140 110,252 1,370,273 532,425 170,765 5,848,120 176,961,437 125,132,732 (15,931,456) (26,755,893) 1,297,104 1,375,352 (78,248) -5.69% 58,594,124 39,782,715 573,158 147,707 3,373,056 90,996,701 34,136,031 (32,402,577) 5,646,684 -35.61% 16.54% 600,791 255,379 (27,633) (107,672) -4.60% -42.16% 1,093,750 2,279,306 208.39% - 21,094,132 1,121,425 261,218 2,028,032 166,250 5,378,689 1,067,428 4,506,417 76,420 21,279 1,938,736 3,750,000 95,467 160,042 100,619 3,254,357 38,639,554 169,554 5,791,730 23,965,000 -11.66% -9.00% -21.38% (2,749,733) -13.04% 39,851 3.55% (25,455) -9.74% 3,847,371 189.71% 504,000 0.00% 414,852 249.54% (629,594) -11.71% (22,343) -2.09% 6,530,622 144.92% 19,600 25.65% 6,524 30.66% (171,587) -8.85% (54,000) -1.44% (37,556) -39.34% (72,902) -45.55% 9,633 9.57% (1,884,084) -57.89% (38,107,129) -98.62% 1,211 0.71% 56,390 0.97% (23,965,000) -100.00% 37,130,524 14,142,240 9,933,451 27,197,073 273.79% 2,956,250 11,185,990 378.38% 2,503,200 536,250 1,966,950 366.80% 20,485,084 6,440,951 14,044,133 218.04% Calculate and Present at least three Liquidity, Solvency and Profitability Ratios in this Worksheet Liquidity ratios 2013 1) Current ratio Current Assets Current Liabilities 48,782,141 27,487,245 1.77 2) Quick ratio Quick Assets Current Liabilities 26,936,491 27,487,245 0.98 3) Working Capital Current Assets - Current Liabilities 21,294,896 Solvency Ratio 2013 1) Time Interest Earned Ratio Earnings Before Interest and Taxes Interest Expenses 11,027,201 1,093,750 10.08 2) Debt to Equity Ratio Total Liabilities Total Assets 27,487,245 50,112,096 0.55 3) Equity Ratio Total Equity Total Assets 22,624,851 50,112,096 0.45 Profitability Ratio 1) Gross Profit Ratio Gross Profit Net Sales 2013 125,132,732 302,094,169 41.42% 2) Net Profit Ratio Net Profit Net Sales 6,440,951 302,094,169 2.13% 3) Return on Equity Net Income Stockholder's Equity 6,440,951 22,624,851 28.47% this Worksheet 2014 Industry Under Averages Armour 2015 129,628,483 92,330,490 113,840,024 83,469,966 1.40 63,582,641 92,330,490 1.36 Times 0.67 Times 37,297,993 30,370,058 2014 2015 40,503,580 3,373,056 19,781,077 2,942,147 105,092,850 132,952,785 0.79 27,859,935 132,952,785 0.21 2014 98,376,839 259,406,820 3.03 1.18 0.46 55,740,047 83,469,966 0.69 12.01 3.13 6.72 Times 27.43 95,510,846 116,682,171 0.82 Times 21,171,325 116,682,171 0.18 Times 2015 86,662,862 265,766,110 0.38 0.31 37.92% 32.61% 20,485,084 259,406,820 8,311,390 265,766,110 7.90% 3.13% 20,485,084 27,859,935 8,311,390 21,171,325 73.53% 39.26% 48.08% 49.89% 5.87% 8.73% 15.41% Quick Assets Cash on Hand Checking Account - Operating MMKT Accounts Accounts Receivable Other Receivables Allowance for Doubtful Accounts Office Supplies Investments - Trading Total Quick Assets 2013 2,483 247,646 2014 2,459 252,858 2015 2,511 243,892 806,288 20,513,628 (1,578,525) 9,259 983,161 56,472,091 1,400,000 (2,387,691) 9,565 1,205,563 49,042,528 1,200,000 (2,942,552) 9,182 6,935,712 6,850,198 6,978,923 26,936,491 63,582,641 55,740,047 RUNNING HEAD: Sample Audit Program 1 Introduction This paper analyzes business risks facing Newham Company which is a publicly traded company operating in the personal product industry. Business risks in Newham could result from frauds such as embezzlement and misappropriation of the company's funds. It could also result from non-compliance to the policies in the industry, management risk and safety risks. The paper also presents an audit program for the company and recommendations on audit procedures that can help in risk identification and assessment. Business Risk Analysis There is the risk of fraud; this is risk that the staff may deliberately manipulate the financial accounts such as cash for unlawful gain. Exposure to the fraud risks can include misappropriation of the company's assets, corruption and fraudulent financial statements. The employees may collude to carry out frauds in the Newham Company which can be detrimental to the financial position (Arens, 2012). Management risks include the risks that the management may not be acting in the best interest of the shareholders but rather they may be acting in their own interest. Change in the management in Newham Company was sparked by the questionable bonus payments that were paid to the executive team. This shows that the executive members in this organization may be using their power to award themselves excess bonuses at the expense of the shareholders. Safety risk includes risks where Newham Company may be posing health hazards to the customers. There has been a law suit that has been filed due to a product that was in appropriately advertised and consequently caused allergic reactions on many customers. Risk of misrepresentation is whereby financial statements may be understated or overstated of the financial figures (Arens, 2012). Compliance risks entail a situation where Newham may not be following the stipulated regulations. For example, the company may not be following the policies rules and laws of advertising. This may have led to false advertising that made the company customers experience allergic reactions. Sample Audit Program 2 Sample Audit Program The objective of the audit is to appropriately identify and assess any risk of material misstatement. The audit is also to help provide a basis in designing and in the implementation of response to the risk of material misstatement. The audit in this case will help in assessing the risk of material statements (PCAOB). Competence is required in the audit for risk assessing. The procedures to be performed have to be sufficient so as to provide a reasonable basis for identifying any material misstatements. The auditor has to obtain an understanding of the company and its environment (Allen, 2011). The risk assessment procedures have to apply for both the audit and for the internal in the audit of the financial statements. For the significant risks, substantive have to be performed Due professional care has to be exercised and it is important to exercise professional skepticism. Professional skepticism is an attitude that helps to question the mind and in case can help in the critical assessment of the appropriateness of and sufficiency of the of audit evidence. Fraud risk needs professional skepticism to gather and evaluate evidence (Allen, 2011). Further, the objective of the audit is to perform risk analysis and asses any risks in the company that may have caused material statement in the financial statement. Also, the audit seeks to examine the compliance risks and safety risks in the company. Procedures Establishing the materiality levels to establish errors. Checking whether the sales invoices have been entered well in accounts receivable ledger to establish any errors and frauds Sample Audit Program 3 Report of Recommendations Newham Company approach to Sarbanes-Oxley risk assessment has to encompass assessment of the completeness and accuracy of transactions as they are entered into. Also risks associated with the segregation of duties, confidentiality and integrity of financial data have to be looked into (Sarbanes-Oxley). For better risk analysis, external audit can include sampling methods that can be utilized to help in the identification of risks. Sampling method entails the application of compliance and substantive procedures for further risk identification. Sampling can also help in identifying and evaluating evidence of any misappropriation and any non-compliance (Romano, 2004). Sampling can be used in compliance tests to evaluate the controls in determining whether they are in place and whether they are working. For example, the tests can be performed on the information system to evaluate the outcome of the control. A test can also be performed on the invoices to ensure that they are appropriately prenumbered and all are accounted for. Sample Audit Program 4 References Allen. (2011). Auditor risk assessment: Insights from the academic literature. Accounting Horizons, 20(2), 157-177. Arens. (2012). Auditing and assurance services. an integrated approach. Boston: Prentice Hall. Romano. (2004). The Sarbanes-Oxley Act and the making of quack corporate governance. Running head: Sample Audit Program 1 Sample Audit Program Student Name Institution Sample Audit Program 2 Introduction Newham Company is publicly traded company operating in the personal product industry. The company produces cosmetic and body care products. Newham Company sells its products to large department chain stores such as Wal-Mart and Target that then sell to final consumers. The competitors of the company include Revlon Inc. and Avon products Inc. the company had a constant growth over the past years. However, there has been change in executive management, including the CEO and CFO. The change was sparked by questionable bonus payment that was paid to the executive management team based on the company performance. Consequently, a lawsuit was filed in the claim that new product was not properly advertised, leading to many customers to experience allergic reactions. Business risk analysis Business risks are inevitable part of the business. From the financial risks such as investments, new market competition, unwelcome threats in the business world. Therefore, the management need to equip the business with risk management strategies to be ready to meet risks and fight them with minimal disruptions of the business operations. The business risks for the Newham Company comes in many forms and it is important to consider different types of risks in order to properly assess the ones that greatly impact the business operations. Therefore, Newham Company need to create a list of the identified business risks helps the company to organise risks assessment. First in considering the business internal environment, the following risks will be looked at relating to the Newham Company: financial, marketing, operational, strategic and work force risks. Second, external business environments consider the changing economy, new market competition and natural disasters (Francis, 2011). However, some business risks are not easily noticeable and therefore, the identification process needs to be carried carefully. We are considering the business risks for each business function in Newham Company. Therefore, we are evaluating each business functions in regards to the effects that would occur if the function were interrupted, unavailable or significantly changed. Therefore we are going to consider: The types of events that may adversely impact the business function The upside and downside of failure scenarios for each business function. Also need to review the alternatives for each risk identified. Business risks considering in each department 1. Safety Potential for human loss of life or injury Potential for major incident or accident such as fire, explosion, spill or release Environment damage Office or facility security 2. Revenues Loss of customer base Recoverable monetary loss Lost opportunity in time to market Unrecoverable monetary loss Sample Audit Program 3 3. Costs Costs incurred due to problems that could have been prevented Costs due to lost discounts, increased warehousing space, vendor changes Legal defence costs 4. Legal Regulatory compliance failures Results or actions that could justify legal actions against the company(litigation) 5. Related exposure Loss of customer Loss of goodwill Loss of shareholders confidence Loss of reputation or public image or investor confidence 6. Security breaches System breaches causing lost data System breaches causing loss of capital Physical security breaches Audit program General items 1. Get relevant financial information Monthly financial reports Charts of accounts listing End year trial balance report CARL system quarterly report 2. Review relevant financial information for any unique or unusual items relating to the field. 3. Review previous internal auditors and obtain their findings: 4. Review the internal control questionnaire: What are the field perceived internal control strengths? Are there any weaknesses that require additional audit testing? 5. Get a copy of the field accounting policy manual if available in the company Cash 1. Get the information from the field treasurer about the procedures for receiving and disbursement of cash. Sources of cash Frequency of deposits Sample Audit Program 4 Who makes the deposits The level of cash received The nature of documentation of expenditures such as check requests, invoices, agreements. Authorization procedures 2. Examine whether the level of cash held in the field and in the office is appropriate 3. for petty cash funds Is the company maintaining an accurate petty cash voucher? The internal auditor needs to know whether Physical cash counts are conducted routinely by people who are not direct custodian of petty cash funds. Also are the physical cash reconciled with the petty cash voucher and are all variances explained. Finally, are the physical cash counts documented by those people who performed the counts and reconcile these counts against the petty cash voucher (Trotman & Wright, 2012). 4 for field checking accounts Determine the number of signatures required on each check Examine the process by which cash is received for mission operations Get bank statements for each bank account Determine the timing and frequency of the preparation of bank reconciliations and know who does the reconciliation Summarize listings of deposits from the bank statements and reconcile the amounts with reported home office transfers and the other sources of income reflected on the field financial reports. Get the test of accuracy and bank reconciliations Verify whether second party reviews bank reconciliations monthly. The examinations need to be documented with a date of examination and a signature of the second party. Expenditures 1. Through the review of the check registers for the prior periods, months, select a sample of checks and review the following: Cancelled checks for the agreement of endorsement, payee, amount Supporting invoices for agreement of description, amount, and date and account classification. Proper authorization in accordance with the agency policy 2. Evaluate the check register for the prior moths and concentrate on the unusual items such as large amounts, payments to staff, payment to field treasurer/director related persons, payments to banks, payments to individuals (Johnson, Iacob, Vlja, van Sinderen, Magnusson & Ladhe, 2013). 3. In case of any travel advances, be concerned with the reimbursement with the field treasurer and determine whether the documentation includes the person incurred expenses, purpose, date, place and reason for incurring the expenses. Sample Audit Program 5 Revenues In connection with the proper evaluation of deposits in the cash area, reconcile all the deposits to the receipts recorded on relevant financial reports. The internal auditor must independently confirm with the home offices and other funding sources the amount and date of fund transfers. Therefore, the report must reconcile with the revenue reported in the field. Finally, confirm the nature of the sources of receipts and any unusual recording procedures and the entries (Vasarhelyi, Alles, Kuenkaikaew & Littley, 2012). From that audit program, the following audit procedures will be followed regarding the trial balances: Confirm selected banks accounts and any other special arrangements: this will help on confirmation for the purpose of getting moderate to low level of assurance. In any internal auditing, the audit objectives are the risks that cash may not exist and cash transactions may not be recorded accurately. Review confirmation replies: therefore, for confirmations returned, agree with the account information and account balance to comparatively summary. Second, investigate the discrepancies reported and questions raised in review and evaluate whether the adjustments are necessary (Vona, 2012). Report of recommendation Basing on our audit and experiences, we have come up with the following recommendations basing on further risk analysis, sample methods and other major concerns. The company need to list and prioritise the business functions that require contingency planning. The activities provide a means to determine the order to develop the contingency plans for all the business functions. First, managers need to rate all failures scenarios for all the business functions and pre-emptive planning items. Second, the managers should make the items with a threat to the top priority and rank the remaining items by combining their risks totals (summing up all the risks values in each business function). Then perform a reality check on the prioritized lists. This need to be done for the risk of higher cost or loss of revenues since they may be more critical to business than litigation costs due to businesses poor liquidity (Alali & Yeh, 2012). The company need to manage the identified risks as being part of the operational management practices: there are many vicissitudes that takes place due to strategic, daily operations and the compliance projects. Therefore, the company should ensure that new risks are not incurred by reviewing change to determine if it increases or eliminate the risks. Thus, the manager need to revise the information recorded for the business function and adjust contingency planning accordingly (Sadgrove, 2015). Management of the company need to use continuous audit procedures that will assist in determining if controls are effective and the information produced for decision making are relevant and reliable. The continuous auditing ensures that errors and fraud are minimised. It also ensures that operational efficiency is increased and bottom line results are improved through a permutation of cost savings and reduction in overpayments. In this case, internal auditors are required to address end to end business process and internal controls that are present in the business activities (Budescu, Peecher & Solomon, 2012). Management of the company needs to install new technology in their system that will make it easier to access data. Technology will also give computing power and this makes real time analysis feasible. This will ensure that information to be audited is generated by reliable systems. This will result to an effective connection between the Sample Audit Program 6 auditors system and that of the audited company. To be able to overcome the business risks, the internal auditors must understand the business functions well before determining the appropriate analytical techniques and identifying the potential risk and key control points. We also recommend on security and maintenance of the work document files. The work documents need to be maintained for at least 6 years from the date of publication of the final report. Files need to be protected and ensure that only staff members with relevant authorities' will have access to the documents. Conclusion To conclude, following the procedures used in the auditing of the Newham Company, we randomly selected a sample of 216 transactions across the year within which 18 from each calendar month. The auditors found all the invoices in the sample and none was missing. Finally, all the invoices were properly posted to the general ledger sales and account receivables control accounts, and each was posted to the rights customers' individual account. Sample Audit Program 7 References Alali, F. A., & Yeh, C. L. (2012). Cloud computing: Overview and risk analysis. Journal of Information Systems, 26(2), 13-33. Budescu, D. V., Peecher, M. E., & Solomon, I. (2012). The joint influence of the extent and nature of audit evidence, materiality thresholds, and misstatement type on achieved audit risk. Auditing: A Journal of Practice & Theory, 31(2), 19-41. Francis, J. R. (2011). A framework for understanding and researching audit quality. Auditing: A journal of practice & theory, 30(2), 125-152. Johnson, P., Iacob, M. E., Vlja, M., van Sinderen, M., Magnusson, C., & Ladhe, T. (2013). Business model risk analysis: predicting the probability of business network profitability. In Enterprise Interoperability (pp. 118-130). Springer Berlin Heidelberg. Sadgrove, M. K. (2015). The complete guide to business risk management. Ashgate Publishing, Ltd.. Trotman, K. T., & Wright, W. F. (2012). Triangulation of audit evidence in fraud risk assessments. Accounting, Organizations and Society, 37(1), 41-53. Vasarhelyi, M. A., Alles, M., Kuenkaikaew, S., & Littley, J. (2012). The acceptance and adoption of continuous auditing by internal auditors: A micro analysis. International Journal of Accounting Information Systems, 13(3), 267-281. Vona, L. W. (2012). Fraud risk assessment: building a fraud audit program. John Wiley & Sons