Why do auditors need to understand their audit clients business and industry to develop benchmarks for evaluating the firms financial statements and assessing their fair presentation?

Preliminary steps to doing these, they need to understand the

1. Clients Business Risk;

2. Identify sources of material misstatements; and

3. Possible internal control weaknesses both in design and operation.

Required:

Use Walmart, a retailer, identify the SIC code and a key competitor. To illustrate the issues from 1 to 3 use the sales cycle.

Use some relevant analytical procedures (number can be around 6 or more) for this cycle to set up your analysis. Use the broad framework of SOX for issues that help with answer to #3.

The KPMG Lens model could be used as a template.

Question 1 (b)

Discuss the applicable GAAP used by Walmart for the Revenue Cycle.

Question 2

Postulates of Auditing

Required:

(1) Discuss two postulates put forth by Mautz and Sharaf in their monograph.

(2) Based on your choice of the two what is the current situation in auditing theory and practice? Examples for discussion: are they implemented in practice and/or theory, what are some unresolved issues in the current practice of auditing? Will they be relevant in the next 20 years when auditing may be done by Robots?