Rady School of Management

University of California, San Diego

Management 132 Fall 2022

Instructor: Bruce Blakley

Term Project

Completion of this term project is a requirement for completion of the course.

The term project is due at 5 PM Tuesday, December 1, 2022, our last day of class.

Each student will submit their own paper.

Each part is worth 10 points.

Use the forms on the following pages to report your work for the term project. Use as much space as you feel appropriate to complete your answers. Please no Pages documents.

As with other course work, this project is to be in your own words, not copied material. Identical comments with other students submissions will be considered not original work by both parties.

Term Project Part 1 Public Company Reporting

This is an individual project.

Use this form to record your answers.

Name

Student ID Number

Select one public company of the following:

Rivian Automotive of Irvine, California, (Ticker symbol RIVN) 10-K for the year ended December 31, 2021, filed with the SEC February 22, 2022, and the most recent 10-Q for the quarter ended 6/30/22 filed August 11, 2022.

For the company selected, go to their web site and a web site independent of the company that provides financial information and familiarize yourself with information regarding the company including the Companys annual filing on Form 10-K and answer the following questions:

Company Name
Fiscal Year End
Industry
Exchange & Trading Symbol
Audit Firm or Firms
Financial information web site consulted for additional reference

What kind of opinion has the audit firm issued on the financial statements and the system of internal control? Does anything appear unusual about the reports (financial statements and internal controls) from the independent auditors? Note that for public companies, auditors are now required to include language about significant audit matters in their opinions so the auditor has to include such topics it does not mean that these items are problems.

Can you locate in SEC filings (not in the 10-K) what the most recent annual audit fees are for the company?

What is the companys industry and identify one unique risk factor for that industry?

Identify one competitor for this company. How does the company compare (market share, size, etc) to this competitor?

Identify what you think would be a specific detailed risk (do not use the terms detection, control or inherent risk) in the audit of this company and describe:

(A) The audit risk,

(B) Why you think this is a risk related to the audit; and

(C) How you might change your audit procedures to address this risk. Include references to the financial statements in your comments, and if you are making assumptions, state those assumptions.

Identify a significant account grouping on the balance sheet and suggest some procedures you think the audit team would use to complete their audit work on these accounts. (Examples cash accounts or accounts receivables or inventory or some unusual asset or liability)

Part 2 Other Topics

Management of an audit team

The management of a team of auditors involves knowledge of professional standards and leadership of the individuals on the team. Stress and unexpected developments are not unusual events during an audit. The team leaders should be prepared to react and make decisions that perhaps they have never experienced before.

Please describe what you think are appropriate actions if you were the audit team leader(manager), and you had the following issues arise on the audit (treat them as individual, unrelated items):

Your clients business is the manufacture and sale of E-bikes similar to the type you find on campuses and community centers for rent they also sell their products directly to consumers. A number of your friends have commented lately on the number of fires and other battery problems on the specific product made by your client. What do you do with this information?

Your firms auditing software system keeps track of each log-on and log-off of each of the team members assigned to the audit. The system will automatically log off a team member if no activity is noticed for more than 30 minutes. You are looking through this past weekends activity for your audit team on a large client and see that team member John (2 years with the firm) was logged on for 18 hours continuously. What do you do with this information?

You have 5 senior staff (these are generally from 2 to 5 years with the firm) assigned to your audit of a life science client in San Diego. One of your audit managers is concerned that two of these seniors are not getting along with each other at all and sound very upset. What do you do with this information?

Last week of the audit crunch time 6 days to go in wrapping up the job and one of your two senior auditors calls and says she has to take her 6 year old to the hospital the child has come down with something that seems serious. What do you do?

CPA Firm Difficulty

The PCAOB web site has a section titled Settled Disciplinary Orders. Locate the findings involving the CPA firm of Hall & Co. and individual Anthony Price, CPA

.

Describe the situations and audit issues that led to the disciplinary action by the PCAOB.

What do you think of the new client acceptance standards of the firm for a client in the business they were in?

What do you think of the Prices understanding of generally accepted auditing standards? Name one specific area where auditing standards were violated.

Two lessons you learned from reading this release.