I have done milestone 1,2 and 3 but need help articulating the final audit report based on these three documents. Final report (summary) should be 8-10 pages plus cover page and supporting documents. Please see attachments. Company chosen is Amazon.

Report cannot be similar to other students submissions because school has data check.

ACC 640 Final Project Guidelines and Rubric Overview The final project for this course is the creation of an audit report with memos. Auditing is a valuable skill in accounting and business, as the odds are very high that you or your organization will be subject to a compliance, federal, IRS, internal, government, or revenue audit at one point in your career. Accountants are required to make professional judgments on both the financial accounting issues and internal accounting forecasts within their organization. The auditor must provide fair, unbiased, materially correct information for investors, employers, employees, and independent stakeholders. This course will help you navigate the relevant processes to provide that unbiased, accurate information. The purpose of the assessment is to familiarize you with the process of auditing and what to do with the auditing information once you have it. You will explore how to plan audit work, analyze financial statements, perform tests on that information, and properly and professionally communicate the results of an audit. The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Three, Five, and Seven. The final submission will be due in Module Nine. In this assignment, you will demonstrate your mastery of the following course outcomes: Determine risk factors for organizations based on analysis of audit risk, audit evidence, and financial statement assertions Develop strategies to mitigate potential risk factors using organizational internal controls Create an audit program to achieve audit objectives related to revenue Analyze audit reports for appropriately communicating the result of the audit process Devise a sampling program for the audit universe to formulate field activities Prompt For this assessment, you should assume you are on the internal audit staff of a publicly traded company. Choose one of the following companies: Walmart, Target, Sears, Kroger, or Amazon. You will be required to obtain the last two years' worth of financial statements and a recent audit report. The internal audit group at the company is tasked with preparing for an upcoming revenue audit and analyzing the business risk internally to mitigate audit findings. You will conduct an internal audit of the company using the information gathered and create a report. Then, you will prepare appropriate memos analyzing the audit report you have prepared, while offering feedback and recommendations. Specifically, the following critical elements must be addressed: I. Procedures and Field Work: For this part of the assessment, you will begin your audit report using the information you have gathered to address the following elements pertaining to procedures and field work. A. Describe how you would conduct the audit process, incorporating the analytical procedures you would use to investigate selected business transactions. 1. What steps will you take to review the company's business transactions? 2. What would your plan be to utilize these procedures? B. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue. 1. What would you need to do in the field to investigate these? 2. Could you convey this information through charts or other supporting documentation? C. Create a test to assess appropriate assertions for designated high-risk business transactions. II. Risk Factors: For this part of the assessment, you will continue your audit report using the information you have gathered to address the following elements pertaining to risk factors in all the major business transactions. A. Analyze the income statement for any potential risk factors and compliance issues with Generally Accepted Accounting Principles (GAAP) or International Financial Recording Standards (IFRS). B. Analyze the risk factors and compliance issues with GAAP or IFRS on the balance sheet. C. Using the internal control, analyze the cash and revenue for potential risk factors. 1. What risks need to be documented? 2. How does this information compare to the company or industry averages, or the company's past performance? D. Explain the audit universe and how you identified it. E. Based on your analysis of risk, devise a sampling program for the audit universe. F. Choose the most preferable audit testing procedures that could be used in the field, based on the audit universe items sampled in this situation. III. Memos: For this part of the assessment, you will use your audit report to prepare memos to upper management. A. Prepare a memo to be reviewed by the chief financial officer (CFO) that summarizes the audit process. 1. Explain any sampling or other audit work that could be done, and if you would recommend the company pursue this additional work. Justify your response. 2. Make recommendations to the CFO on how to mitigate potential risk factors for major business transactions identified in the audit report. B. Assume you are now the CFO. Prepare a memo to the Board of Directors as to what potential issues the external audit team might find and what the company's response should be. 1. Evaluate the findings from the audit report. Be sure to view these findings from the CFO's point of view. 2. Develop a strategy to mitigate risks identified in the audit report. 3. Describe how the company might implement the strategy based on the findings from the audit report. Milestones Milestone One: Draft of Procedures and Field Work (Section I) In Module Three, you will submit a draft of the procedures and field work required for conducting your audit process. Describe how you would conduct the audit process for the company you have chosen, including the analytical procedures you would use to investigate selected business transactions. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue and create a test to assess appropriate assertions for designated high-risk business transactions. This milestone is graded with the Milestone One Rubric. Milestone Two: Draft of Risk Factors (Section II) In Module Five, you will submit a draft of risk factors as identified for all of the major business transactions conducted by your chosen company. Analyze the income statement, balance sheet, and cash and revenue for any potential risk factors and compliance issues with Generally Accepted Accounting Principles (GAAP) or International Financial Recording Standards (IFRS). Based on your analysis of risk, devise a statistical and judgmental sampling program for the audit universe. Recommend the most preferable audit testing procedure based on the audit universe items sampled. This milestone is graded with the Milestone Two Rubric. Milestone Three: Draft of Memos (Section III) In Module Seven, you will submit a draft of your memos to upper management. First, you will prepare a memo to be reviewed by the chief financial officer (CFO) of your chosen company that summarizes the audit process conducted. Then, you will assume the role of CFO of the company and prepare a memo to the Board of Directors as to what potential issues the external audit team might find and what the company's response should be. This milestone is graded with the Milestone Three Rubric. Final Submission: Audit Report with Memos In Module Nine, you will submit your audit report with memos offering feedback and recommendations. It should be a complete, polished artifact containing all of the critical elements of the final project. It should reflect the incorporation of feedback gained throughout the course. This submission is graded with the Final Project Rubric. Deliverables Milestone One Two Three Deliverable Draft of Procedures and Field Work (Section I) Draft of Risk Factors (Section II) Module Due Three Grading Graded separately; Milestone One Rubric Five Graded separately; Milestone Two Rubric Draft of Memos (Section III) Seven Graded separately; Milestone Three Rubric Final Submission: Audit Report with Memos Nine Graded separately; Final project Rubric Final Project Rubric Guidelines for Submission: Your audit report with memos must be 8-10 pages in length including report and supporting documents (plus a cover page and references). Use double spacing, 12-point Times New Roman font, and one-inch margins. Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions. Critical Elements Procedures: Describe Exemplary Meets \"Proficient\" criteria and description demonstrates keen insight into how to conduct the audit process while also incorporating analytical procedures (100%) Proficient Describes how the audit process would be conducted, incorporating analytical procedures for selected business transactions (90%) Procedures: Explain Meets \"Proficient\" criteria and provides a flowchart or supporting documentation describing the high-risk business transactions (100%) Explains the appropriate field work needed to review high-risk business transactions for cash and revenue (90%) Procedures: Create Factors: Statement Factors: Sheet Creates a test to assess appropriate assertions for designated high-risk business transactions (100%) Meets \"Proficient\" criteria and makes cogent connections to the relationship between revenue and accounts receivable (100%) Meets \"Proficient\" criteria and provides keen insight into the risk factors present in the balance sheet (100%) Analyzes the income statement for any potential risk factors or compliance issues with GAAP or IFRS (90%) Analyzes risk factors and compliance issues with GAAP or IFRS on the balance sheet (90%) Needs Improvement Describes how the audit process would be conducted incorporating analytical procedures for selected business transactions, but description is inaccurate or lacks detail (70%) Explains the appropriate field work needed to review high-risk business transactions for cash and revenue, but explanation is cursory or lacks detail (70%) Creates a test to assess assertions for designated highrisk business transactions, but test is inaccurate or inappropriate (70%) Analyzes the income statement for any potential risk factors or compliance issues with GAAP or IFRS, but analysis lacks depth or detail (70%) Analyzes risk factors and compliance issues with GAAP or IFRS the balance sheet, but analysis lacks depth or detail (70%) Not Evident Does not describe the how the audit process would be conducted incorporating analytical procedures for selected business transactions (0%) Value 7 Does not explain the appropriate field work needed to review high-risk business transactions for cash and revenue (0%) Does not create a test to assess appropriate assertions for designated high-risk business transactions (0%) 7 Does not analyze the income statement for any potential risk factors or compliance issues with GAAP or IFRS (0%) 7 Does not analyze risk factors and compliance issues with GAAP or IFRS on the balance sheet (0%) 7 7 Factors: Control Meets \"Proficient\" criteria and analysis demonstrates a nuanced understanding of how the internal control is utilized in analyzing cash and revenue (100%) Analyzes the cash and revenue of the company for potential risk factors using the internal control (90%) Factors: Explain Meets \"Proficient\" criteria and explanation shows a nuanced understanding of the audit universe (100%) Explains the audit universe and how it was identified (90%) Factors: Devise Devises a sampling program for the audit universe based on the risk analysis (100%) Factors: Procedures Meets \"Proficient\" criteria and demonstrates keen insight into the process used to test the items sampled (100%) Chooses an audit testing procedure that could be used and justifies why it would be preferable for this situation (90%) Memos: Explain Meets \"Proficient\" criteria and uses industry-specific language to establish expertise (100%) Explains any sampling or other audit work that could be done and if the company should pursue the additional work (90%) Memos: Make Meets \"Proficient\" criteria and uses industry-specific language to establish expertise (100%) Makes recommendations to the CFO on how to mitigate potential risk factors for major business transactions identified in the audit report (90%) Analyzes the cash and revenue of the company for potential risk factors using the internal control, but analysis lacks depth or does not reference the internal control (70%) Explains the audit universe and how it was identified, but explanation lacks depth or detail (70%) Devises a sampling program for the audit universe based on the risk analysis, but the documentation of risk lacks depth or detail (70%) Chooses an audit testing procedure that could be used and justifies why it would be preferable, but justification is inaccurate or inappropriate (70%) Explains any sampling or other audit work that could be done and if the company should pursue the additional work but explanation is inaccurate or inappropriate (70%) Makes recommendations to the CFO on how to mitigate potential risk factors for major business transactions identified in the audit report, but recommendations made are inappropriate or lack depth (70%) Does not analyze the cash and revenue of the company for potential risk factors using the internal control (0%) 7 Does not explain the audit universe and how it was identified (0%) 7 Does not devise a sampling program for the audit universe based on the risk analysis (0%) 7 Does not choose an audit testing procedure that could be used nor justify why it would be preferable (0%) 7 Does not explain any sampling or other audit work that could be done and if the company should pursue the additional work (0%) 7 Does not make recommendations to the CFO on how to mitigate potential risk factors for major business transactions identified in the audit report (0%) 7 Memos: Evaluate Meets \"Proficient\" criteria and uses industry-specific language to establish expertise (100%) Evaluates the findings from the audit report from the CFO's point of view (90%) Memos: Develop Meets \"Proficient\" criteria and uses industry-specific language to establish expertise (100%) Develops a strategy to mitigate risks identified in the audit report (90%) Memos: Describe Meets \"Proficient\" criteria and uses industry-specific language to establish expertise (100%) Describes how the company might implement the strategy based on the findings from the audit report (90%) Articulation of Response Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to-read format (100%) Submission has no major errors related to citations, grammar, spelling, syntax, or organization (90%) Evaluates the findings from the audit report from the CFO's point of view, but evaluation lacks depth or detail (70%) Develops a strategy to mitigate risks identified in the audit report, but strategy is inappropriate or lacks depth (70%) Describes how the company might implement the strategy based on the findings from the audit report, but description lacks depth or detail (70%) Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas (70%) Does not evaluate the findings from the audit report from the CFO's point of view (0%) 7 Does not develop a strategy to mitigate risks identified in the audit report (0%) 7 Does not describe how the company might implement the strategy based on the findings from the audit report (0%) 7 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas (0%) 2 Earned Total 100% AMAZON: ANALYTICAL PROCEDURES AND RISK TEST To understand Amazon business and identify potential audit risk in cash and revenue accounts, I would apply the following analytical procedures: 1. Compare a variety of revenue and cash financial ratios with previous years, select competitors and industry standards: cash ratio, gross profit, return on revenue, days sales outstanding, COGS to revenue, aging of receivables, turnover of receivables. 2. Conduct a cross-sectional analysis of Amazon for years 2013 and 2014 against main competitors within the same industry to identify trends. 3. Conduct a Sales Trend Analysis by Region and graph sales data by month (2012 -2014) to identify unusual trends. 4. Conduct cutoff analytical procedures by testing sales transactions by comparing sales data (2013-2014) before and after year-end to sales invoices and shipping documentation. 5. Evaluate whether the financial statements include the required disclosures regarding revenue. Is selection and application of accounting principles appropriate for amazon business and consistent with the applicable financial reporting framework used in the retail online industry? 6. Review independent audit reports for the years ended in 2013 and 2014. 7. Review the process used, to elaborate estimates and develop an independent expectation of the estimate to corroborate the reasonableness of management's estimate. The following fieldwork will be required: 1. Obtain the 31 December 2013 and 2014 trial balances and financial statements. 2. Obtain monthly sales data by Region for years 2012, 2013 and 2014. 3. Obtain policies and procedures and organizational charts for credit, billing, and collections area. 4. Interview management and key credit department personnel to gain an understanding of the credit approval and monitoring processes. 5. Prepare common size financial statements for years 2012, 2013 and 2014 using revenue as base. 6. Meet with external audit to obtain an understanding of testing performed and issues identified. 7. Trace 50 or more random customer orders or shipping reports, to the sales journal. 8. Testing of year-end accounting estimates, judgments and decisions made by management. 9. Review 50 invoices (may include sales orders above) to evaluate that invoices reflect approved price and discounts, compare to customer order and shipping records, unit prices, discounts, credits and any special terms. 10. Check bank reconciliation has been reconciled as approved by chief accountant. 11. Observe buyer checking the goods received note and invoiced before authorizing check for payment. 12. Analyze unusual sales made close to year end and vouching to original source documents 13. Scanning general ledger, accounts receivable subsidiary ledger, and sales journal for unusual activity C. Create a test to assess appropriate assertions for designated high risk business transaction. We will test sales cut off by identifying the last shipping advice for the year and examining five large sales for three days before and after year end. References: 1. Clarified Statements on Auditing Standards http://www.aicpa.org/Research/Standards/AuditAttest/Pages/clarifiedSAS.aspx 2. Amazon financial ratios http://www.gurufocus.com/term/pe/AMZN/P%252FE %2BRatio/Amazon.com%2BInc 3. Specialty Retail financial ratios http://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?ind=1307 4. Auditing and Assurance Services: An integrated Approach 15th Edition by Alvin A. Arens, Randal J. Elder, Mark S. Beasley Chapter 8 and 9 AMAZON COMPANY: RISK FACTORS A. Analysis of Income statement The income statement, sometimes referred to as the profit and loss statement, shows the profitability of a company during a given accounting period and revenue is one of the most important financial statement measures. In the income statement for Amazon, revenues as well as costs of operations are recognized. The risk factor from Amazon's income statement may be related with potential earnings originating from its largest customers. For instance, in 2014 accounting period, the entity reported net sales amounting to $88,988 (Amazon, 2014) and 18,908 were recorded as services revenues. It is necessary to evaluate its substantial customers to ensure reliability in revenue reporting and use of appropriate accounting in recording sales and service amounts. Also, the translation of income outside the United States into US dollars may include some material risks in the organization since during 2014, net sales from its international segment accounted for 38% of Amazon consolidated revenues. The risks from Amazon income statement in compliance with US GAAP are associated with the recognition of revenue. Amazon primary source of revenue is the sale of a wide range of products and services to customers which are straightforward transactions but they also offer other services such as AWS, fulfillment, publishing, digital content subscriptions, advertising, and cobranded credit cards which can be difficult and challenging to determine what part of revenue should be recognized. B. Analysis of Balance Sheet Amazon is a big company and it has some complex nonstandard transactions, in domestic and international markets. Size alone often infers complexity, particularly if it leads to complex corporate structures or multiple locations. In Amazon's case, volume size transactions has been assessed as a risk factor. Another risk is associated with item classification. We need to verify that assets and liabilities are recognized and classified in the correct manner and in compliance with GAAP and IFRS. C. Analysis if Internal Control Being Amazon a retail online company, adequate internal control over IT infrastructure (operations and security systems) is very important involvement of the top management is crucial. Internal controls should identify, capture, process, and report appropriate information. These are policies and procedures that ensure that the management's directives are carried out. In the annual report, top management has ensured that its internal control supports the company transparent reporting according to US GAAP. External auditors have also indicated that Amazon internal control system is appropriate. However, there is a need to assess internal control procedures for cash, sales and account receivables accounts with credit approvals and adequate creation of sales receipts. D. Explain the audit universe and how you identified it. An audit universe relates to a range of activities, structures and functions of an auditable accounting entity. The audit universe comprises of a document on an entity's audit and risk identification which is often updated periodically. Risk based form of audit includes the assessment of risk factors regarding the corporate profile, departmental performance and risk exposure of the entity. The audit priorities emphasizes on areas that has greatest needs from the company's departmental perspective. E. Sampling program for the audit universe. The audit universe will cover operations, collection and suppliers procedures and activities. We will evaluate Amazon's three largest suppliers to verify the occurrence and completeness of sales transactions. Top management from one Europe and one Asia location in the warehousing and collection activity. The audit universe was determined by the risk, materiality, nature of activity and last audit date. F. Choose the most preferable audit testing procedures that could be used in the field, based on the audit universe items sampled in this situation. We will test sales cut off by identifying the last shipping advice for the year and examining five large sales for three days before and after year end. We will also analyze sales, account receivable for a sample of 60 transactions including the five biggest earnings records in the US market and 30 transaction in the international market to ensure revenue recognition was done properly and in compliance with accounting framework. References: 1. Clarified Statements on Auditing Standards http://www.aicpa.org/Research/Standards/AuditAttest/Pages/clarifiedSAS.aspx 2. Amazon financial ratios http://www.gurufocus.com/term/pe/AMZN/P%252FE %2BRatio/Amazon.com%2BInc 3. Specialty Retail financial ratios http://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?ind=1307 4. Auditing and Assurance Services: An integrated Approach 15th Edition by Alvin A. Arens, Randal J. Elder, Mark S. Beasley Chapter 8 and 9 5. Revenue Recognition http://www.pwc.com/us/en/cfodirect/assets/pdf/accounting-guides/pwcrevenue-recognition-global-guide-2014.pdf AMAZON INTERNATIONAL Amazon Company Office of the Auditor General November 15th 2015 MEMORANDUM TO: CHIEF FINANCIAL OFFICER FROM: xxxxxxxxxxxxxx Auditor General SUBJECT: Audit Memorandum-Sampling Work and Recommendations to Mitigate Risks This memorandum is intended to provide the necessary information and clarify some of the issues which are highlighted above. The role of the management is to keep proper books of accounts and preparation financial statements. The results from the audit report carried out on the past few months have raised some concerns in the organization. We have audited the financial statements which comprises statement of financial position of the year ended December 31st 2014. We have taken large samples of transactions of every class with the aim to determine its occurrence, accuracy, completeness and cut off. The simple random sampling and systematic sampling methods were used when analyzing all the transactions. Since most of the Amazon Company transactions are carried online, then it has been a bit challenging to trace all the transactions. This prompted the audit team to perform system checks. Amazon should have its own systems auditor and an independent audit department to review all the financial transactions in every 3 months. This is aimed at ensuring that, Amazon will prepare financial statements that meets international accounting standards. In order to mitigate any possible financial risks, we recommend that the firm must frequently review its internal control systems and perform system checks. This will ensure that no unauthorized persons will have access of transaction records. Secondly, Amazon must ensure that its employees are rotated and none of them one should hold certain managerial position for longer periods. We also recommend that Amazon must segregate its duties so as to reduce any attempt of theft or corruption. There should be no manager who performs everything but duties and responsibilities are shared among the all the officers within the various departments. Yours faithfully, Chief Auditor AMAZON INTERNATIONAL Amazon Company Chief Financial Officer November 15th 2015 MEMORANDUM TO: BOARD OF DIRECTORS FROM: CHIEF FINANCIAL OFFICER xxxxxxxxxxxx SUBJECT: Audit Memorandum-Findings of the audit Recommendations to Mitigate Risks The external audit report that concerning the financial statements released last month have indicated some internal deficiencies and made some of the recommendations. The management is responsible for preparing the financial statement in accordance in accordance to generally accepted accounting principles, the firm therefore, must put in place structures internal control structures that meets international standards in order to reduce the possibility of occurrence of financial material misstatement in the financial records and reports. Since most of the firm's transaction are carried online, effectiveness of the firm's internal controls are at risk. This has been a point of concern of the auditor. The management audit indicates that the relationship between the management and the employees has deteriorated and the firm has to improve on this. Good relations amongst employees will motivate the employees to be satisfied with the management and thereby improve production. Another point is that the firm must ensure that all the duties in the organization must be shared by the respective departments. This will reduce the chances of fraudulent activities. Based on the findings above, the firm therefore must outsource system analyst who will perform system checks. The internal controls is very key to firm and it has to meet international levels and all the information of the firm has to employ experts to this job. The firm has to maintain its financial standards and this can only be achieved by employing staff who are able to handle the job demands. In regard to implementation of strategy, my recommendation is that the firm needs to adopt a mix of centralized and decentralized strategy in supervision and communication within the organization. This will improve communication process in the entire organization and establish effective information delivery. Social events needs to be held more frequently in order to improve the relationships between the management and the employees. This will reduce the possibility of occurrence of constrained relationships as the social audit indicated. Regular trainings also is recommended in order to improve the abilities of the employees. Yours, Chief Financial Officer