Corporation Finance
WEEK 2 ASSIGNMENT- CASE STUDY
Analysis and Audit Plan for a Public Company
For this assignment, you may select any public company that issues stock and is traded on the stock exchange.
The objectives of this project are as follows:
1. To acquaint students with the annual report and Form 10-K of a publicly held company audited by a CPA firm.
2. To provide data for the practical application of certain steps in the financial statement analysis and audit process
Detailed Instructions:
This project should not be viewed as a management or marketing project. Very little time should be allocated to management and marketing.
Obtain a copy of a recent annual report of a publicly held company with stock actively traded on the New York, NASDAQ or other over-the-counter exchanges. Answer the following questions (in paragraph form, using APA writing guidelines):
a. What is the company’s industry?
b. What are its primary products?
c. What raw materials does the company use?
d. How large is the company:
sales
assets
employees
e. Where is the company located?
f. What other people/companies are closely associated with this company?
g. Look at the annual report (It is different from the 10K and if you cannot find the actual company annual report, you may review another company’s annual report for the general format for comparison with the 10K).
What image does it intend to convey?
What are the segments and functional contents of the report?
3. Obtain a copy of the Company’s 10-K report for the same date as the annual report. Answer the following question:
a. How does the 10-K differ from the annual report?
4. Obtain outside information about the company and its industry (Some of this information may be available in the Annual Report or the 10K). Answer the following questions:
a. What are the key economic factors about the industry?
b. Where is the company in its life cycle?
c. What are the five or six most important factors for success in this business?
d. How does this company stand with respect to these factors?
e. Describe four or five key business risks related to the clients business and industry.
f. What notable accounting considerations are there for companies in this industry?
g. What legal or regulatory matters are of concern?
h. What social matters are of concern?
5. Analyze the company’s financial strength (using various financial ratios discussed in the chapters):
a. Assess the financial strength of the company for a three year period? Period must be consistent (example 2017, 2018, 2019).
b. How is the financial strength likely to change in the next year or so?
c. What are its sources of capital and what is the value of the company’s capital?
d. How have capital markets responded to the company in the last year (stocks, bonds and loan increases over the previous year?
e. How does the company compare with others in the industry?
6. Prepare additional financial computations:
a. What is the net increase in cash flows for the most recent year?
b. What ratios show increases over the previous year’s?
c. What additional information in your opinion, can you share about the company’s financial situation?
d. If management faced tremendous pressure regarding the entitys financial performance, what opportunities might exist for them to engage in fraudulent financial reporting?
e. To what extent do you believe it will be appropriate to reduce assessed control risk?
f. How will audit effort be allocated among geographical areas?
g. What form of auditors’ report do you expect will be issued; what does it mean?
Per the syllabus, the acceptable number of pages for weekly research assignments range between four to five full double-spaced pages (six seven pages for final papers), depending on the content. This does not include cover and reference pages. For all chapter assignments, you must incorporate at least three current sources that provide rationale or support for the topic under discussion. Your submission must include a cover page with the name of the course, your name, the instructors name, title, and the date.
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