This week is the final part of your Course Project. For complete details on the project, please refer to the Course Project - Introduction in Week 03. In prior weeks you were asked to report on the following scenarios pertaining to Kobyashi Moru. Remember that each of these scenarios was an independent situation. Week 03 - Segment Reporting Week 06 - Explanatory and Opinion Paragraphs Week 09 - Financial Statements Prepared using Chinese and GAAP Standards In your research, you found significant conflicting issues between global reporting standards. These affect every audit engagement that addresses books of original entry that utilize foreign GAAP that are translated into financial statements. Your previous coursework has taught you that in order for stakeholders to accurately address financial performance metrics, they have to be based on standards that are consistent and that follow US GAAP rules. Comparative analyses can only take place in an environment of stable, static and consistent rules.Your final project will be to synthesize the issues/data previously researched into a single paper. Prepare a 3-5 page paper that demonstrates your understanding of the issues. Address the following questions in your final paper: What affect will foreign accounting standards have on your audit engagement from a resource, time and cost standpoint? How will foreign standards affect your audit plan and sampling techniques used to validate original transactions? How will you approach potential fraud issues in a global environment? How is the accounting profession changing in order to address the issue of inconsistent accounting standards? Prepare your final paper utilizing APA style. This should include the following: One inch margins 12 point Times New Roman font Double-spaced One-half inch indent for new paragraphs Title page Reference page Proper citation of sources within paper

Running Head: PART II - EXPLANATORY AND OPINION PARAGRAPHS 1 Part II - Explanatory and Opinion Paragraphs Part II - Explanatory and Opinion Paragraphs PART II - EXPLANATORY AND OPINION PARAGRAPHS 2 Qualified Opinion I have audited the associated balance sheets of Pet Food, USA Limited as of December 31, 2014 and 2013, and the related statements of income, retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express our opinion on these financial statements based on the audits we conduct. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are clear of material misstatement. An audit will include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a fair basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pet Food, USA Limited as of December 31, 2014 and 2013, and the results of their operations and cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America. Koyobashu Moru (02.15.2015) Adverse Opinion We have audited the consolidated balance sheets of Pet Food, USA Limited and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of income, retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on the audit we will conduct. We did not audit the financial statements of Pet Food, USA Limited, a wholly-owned subsidiary, which statements reflect total assets of $156,000 and $167,000 as of December 31, 2014 and 2013, respectively, and total revenues of $9,450 and $88,000 for the years then ended. Those statements were audited by other auditors whose report has been delivered to us, and our opinion, as it relates to the amounts included for Pet Food, USA Limited, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, providing . PART II - EXPLANATORY AND OPINION PARAGRAPHS 3 evidence which supports the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding the foreign affiliate investment and earnings, the financial statements referred to in the first paragraph above present fairly, in all material respects, the financial position of Pet Food, USA Limited as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America. Also, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pet Food, USA Limited and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America. Koyobashu Moru (02.15.2015) . PART II - EXPLANATORY AND OPINION PARAGRAPHS 4 References Investopedia, LLC. (2015). Adverse opinion. Retrieved from http://rasmussen.learntoday.info/section/default.asp?id=WIN15-A340-01. Investopedia, LLC. (2015). Qualified opinion. Retrieved from http://www.investopedia.com/terms/q/qualifiedopinion.asp. . Running Head: PART III - FINANCIAL STATEMENTS 1 Part III - Financial Statements Part III - Financial Statements PART III - FINANCIAL STATEMENTS 2 The final audit report of the entity should show that the financial statements of the foreign entity have been prepared to be in conformity with the accounting principles generally accepted in the United States. In auditing the financial statements of the foreign entity, the auditor should perform the procedures that are required to comply with the necessary general and fieldwork standards of the U.S generally accepted auditing standards (Arens, 2012). Whoever the auditor may be, they should also consider the assertions embodied in the financial statements of the foreign entity. This is because the financial statements of the foreign entity have been prepared in accordance to the Chinese accounting standards. These two have different accounting treatments for certain items on the balance sheet, which an accounting principle in one country may require assets to be revalued to adjust the effects of inflation (McKenna, Francine, 2015). In another country, the accounting principles may not permit the recognition of deferred tax. This therefore would require the auditor to perform audit procedures to test the revaluation adjustments of the assets of the entity. An auditor will also be able to report on the two sets of financial statements if in his judgment, the entity's principles and accounting practices are appropriate in circumstance and are sufficiently disclosed in comprehensive manner (McKenna, Francine, 2015). The auditor then determines the appropriateness of the accounting policies used in the preparation of the financial statements to ensure that they are in compliance with the Internal Accounting standards. Altogether, the auditor will also report the financial statements of the foreign entity using a U.S style audit report and discuss the significant differences of the U.S accounting and reporting practices with the Chinese reporting practices and the significance of the difference to the entity (Arens, 2012). Also, an auditor must provide in the audit report a statement to showing that the financial statements have been audited in accordance with the auditing standards . PART III - FINANCIAL STATEMENTS 3 generally accepted in the United States of America and with the consideration of the Chinese auditing standards. References Arens, Elder, & Beasley. (2012). Auditing and Assurance Services. 14th Edition, Prentice Hall. . PART III - FINANCIAL STATEMENTS McKenna, Francine. (2015). "Auditors and Audit Reports: Is the Firm's "John Hancock" Enough?" Forbes. . 4