Audit Risk Analysis of the Coca-Cola Company Essay
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Audit Risk Analysis Project The Coca-Cola Company Kimberly Williams Liberty University
MEMORANDUM To: From: Kimberly M. Williams, CFE Subject: Audit Risk Analysis of The Coca-Cola Company Date: August 14, 2011
I have carefully used information derived from the company and the Securities and Exchange Commission (SEC) to assess the risk of accepting The Coca-Cola Company as an audit client. My research was based on careful analysis of recent developments and key items including recent financial statements and business ratios.
The financial condition of the company included a comparison of the financial ratios of The Coca-Cola Company against the industry. This analysis was designed to provide a framework for assurance None of these external risk factors produce a going concern for Coca Cola Company at this point. They should be monitored and updated in the coming years to reassess for the potential of going concern. The following areas identified as internal high risk factors for the Coca-Cola Company. Revenue is a high-risk account due to the fact that management will be pressured to overstate the account and look better to shareholders. Revenue recognition rules are complicated to understand and may be overlooked by accounting clerks when entering revenue. To review the revenue account, especially all transactions occurring at the end of December (to be sure that revenue wasn’t entered in 2010 that shouldn’t be recognized until 2011). All revenue over a material cutoff amount should be confirmed through a letter to customer. The current asset segment is high risk due to the substantial change in the amount from 2009 to 2010. Specifically, these changes can be seen in the cash and cash equivalents account and short-term investments. Review the cash balances and account reconciliations and find a way to receive confirmation of the short-term investment. The Accounts receivable account is high risk for a couple reasons. First of all, because cash has not been received for the sales yet, there is no proof that they truly happened. And secondly, there
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