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. Use of 10K and/or the Bloomberg terminal may be helpful to find some useful variables to be included in the analytical model.