This semester we are going to use PepsiCo for the company analysis project.You can obtain information about the firm from its corporate web site at http://www.pepsico.com/Investors or at the SEC's Edgar web site at http://www.sec.gov/edgar/searchedgar/companysearch.html.

Unless otherwise indicated, all questions relate to the current annual financial statements. The answers to the following questions may not be directly found in the firm's reported information.You may have to infer it from what information is disclosed and supplement the financial information with other publicly reported information.Please indicate the source of your information. You may want to review the syllabus for information about this topic.

What type of audit report did Pepsi receive?

What audit firm audited Pepsi?

Did the auditors note anything in Pepsi audit report?

What audit firm audited Coke?

What are the advantages to firms in the same industry of using the same audit firm?

Why might some firms in the same industry use different audit firms?

Auditors often estimate materiality based on benchmarks of 5% of net income for individual (also called overall) materiality.Then aggregate (or posting materiality) is usually five or 10% of individual materiality.Use these benchmarks and calculate the individual and aggregate materiality levels that Pepsi's auditors would have used.

Using the same percentages, calculate the individual and aggregate materiality levels that Coke's auditors would have used.

The estimates of materiality differ between the two companies.What issues would that cause for an auditor?

What issues would the differing materiality levels cause for financial statement users?

Summarize the SEC's position regarding the use of numerical thresholds by auditors.See Staff Accounting Bulletin (SAB) No. 99 available at http://www.sec.gov/interps/account/sab99.htm.