Using current literature, your submission must answer the following questions:
Consider the inventory accounts on the balance sheet for each company, along with the accompanying footnote. What are the most relevant assertions that management is making with regard to its inventory?
What assertions are implied in the Property, Plant, and Equipment account? How would valuation be affected if each company decided to downsize and eliminate some of its storefront locations?
Examine the assets on the balance sheet of each company. Identify the assets that are subject to (1) fair value adjustments, (2) impairment tests, (3) estimates to either net realizable value or lower of cost or market value. What are the implications for audit evidence that will be gathered for these accounts?
Consider the debt account on each balance sheet, along with the accompanying footnote. What are the most relevant assertions that management is making with regard to its debt?
Describe the primary risks facing PepsiCo. Describe the primary risks facing Coca-Cola. Compare the risks of PepsiCo and Coca-Cola. Why would an auditor be concerned with these risks? Provide a short example of how you would use audit software to detect this risk.
What are the key revenue accounts for PepsiCo and Coca-Cola? What accounts involve critical accounting estimates? What do their footnotes say about the use of accounting estimates? What risk do these estimates pose for the auditor?
What are the key cash and liquid asset accounts for each company? What types of marketable securities does each company possess? What are the critical accounting policies for these accounts?
Review the statement of cash flows and management discussion and analysis related to the liquidity of each company. What are the significant trends that you note? What are the audit implications of the different trends of each company?
Are there any ethical issues in these areas that an audit team should be watching out for? If so, what areas?
