STEP-BY-STEP REQUIREMENTS:
FIRST. FOLLOW ALTERNATE INSTRUCTIONS GIVEN
https://wrds-www.wharton.upenn.edu/
Login using the class credentials:
USERNAME: sp24acct524
PW: Mtxh524.absin
SECOND. Generate a list of ONE client of each of the Big 4 audit firms within the same industry (that is, all client firms must be in the same industry).
HINT: SEARCH FOR BEST BUY (TICKER SYMBOL BBY) IF YOU USE THE CONSUMER ELECTRONICS INDUSTRY AND THEN USE ITS NAIC OR SIC CODE TO SEARCH FOR OTHER COMPANIES IN THE SAME INDUSTRY.
HERE is a site you can use to find SIC codes:
http://siccode.com/en/business-list/sic%3A5731Links to an external site.
Use your creativity and, obviously, internet search tools to find other firms within the chosen industry.
THIRD. Go to SEC.Gov and download (but don’t print out) the latest available FORM 10-K for each of these FOUR (4) firms. SAVE IT FOR LATER USE.
DO NOT USE CORPORATIONS THAT ARE NOT HEADQUARTERED IN THE UNITED STATES, EG., SONY.
In your 4 client firm form 10-Ks from SEC.Gov, do the following:
Examine the business information and business and other risk sections of the documents. Make note of whatever you believe the key risks are, yes–a subjective judgment based on the company’s description. Briefly list the three highest risks (or so you believe) the company faces in your spreadsheet itself, or in a linked Word-format document.
Prepare 3 (three) questions that you would ask the Chief Risk Officer of ONE of your 4 firms that would better enable you to assess the client firm’s choice of ONE of these three risk factors.
For your 4 companies, find the required management assessment of its own internal control systems AND the Auditor’s required audit report on each client’s internal control system in the Form 10-K (or equivalent form for a foreign-based firm). Do the clients get it “right” or not?
YOU MUST ALSO, obviously, look at the relevant sections of the SEC Form 10-Ks for one client for each of the auditing firms in order to get a detailed version of the two assessments: management’s internal control assessment on the one hand and the auditor’s findings on the other.
In each firm’s 10-K form, management of the client firm is required to provide its own assessment of its internal control over financial reporting (ICFR) system. Off hand, I think it’s section 9 of the 10-K. The auditor is required under SOX and PCAOB Auditing Standard 7 to do its own, separate, evaluation of the client’s ICFR. That will show up in the audit report on the client’s ICFR. DO THE TWO ASSESSMENTS AGREE OR NOT? That is what I am asking.
Keep track of this for later use.
FOURTH. Perhaps using Yahoo Finance or Macrotrends.net, there are more, find
the financial statements of each of these 4 clients and prepare the following financial ratios FOR THE LATEST TWO YEARS SHOWN. You obviously may use the financial ratios provided by Yahoo Finance or Macrotrends.net, etc.
Debt/total assets
Debt/Equity
Gross Margin Percent
Inventory Turnover (IF APPLICABLE)
Working capital
Current Ratio
Quick Ratio
Insert this information in an Excel File.
Keep for future use.
FIFTH:
Use ONE of these tools (your choice) to investigate your company. If you find anything significant WITHIN THE LAST THREE YEARS ONLY, please describe it and provide any weblinks involved. LIMIT YOURSELF TO ONLY ONE EVENT OR SCANDAL THAT YOU BELIEVE MAY IMPACT THE COMPANY’S REPUTATION OR FINANCIALS. tell why you chose that event/incident. BE SURE TO IDENTIFY THE INVESTIGATIVE TOOL YOU USED. DO NOT USE ANY RESOURCE FOR THIS THAT YOU HAVE TO PAY FOR!!!!
Corporate/Business Tools
OpensanctionsLinks to an external site. (“a global database of persons and companies of political, criminal, or economic interest. It combines the most important sanctions lists, databases of politically exposed persons etc.”)
Open CorporatesLinks to an external site.
Investigative DashboardLinks to an external site.
ICIJ Offshoreleaks DatabaseLinks to an external site.
Corporation WikiLinks to an external site.
An overview of other companies research toolsLinks to an external site.
Little Sis databaseLinks to an external site. of relationships between people, companies etc.
PLEASE NOTE THAT THIS IS A RESEARCH ASSIGNMENT, NOT AN ASSIGNMENT IN WHICH THE PATH TO FOLLOW IS CRYSTAL CLEAR. I TELL YOU THIS BECAUSE YOU MAY END UP WITH ROAD BLOCKS HERE AND THERE AND WILL NEED TO APPLY YOUR CREATIVITY, PATIENCE, AND HARD WORK ADDRESSING THEM.
SIXTH. Write a three page (1300 word maximum) essay describing how you went about completing this assignment, any particular problems that you had in completing the assignment, how you think it enhanced (or did not enhance) your understanding of the auditing process, and whether you think the assignment should (a) not be used in the future; (b) should be used in the future; or (c) should be used in the future with any suggested modifications.
SEVENTH.
Please package your assignment in one file, including the excel files, by creating a ‘zip’ file and submitting that.
The backup documents need to be handed in too (i.e., the Excel file.)
You will be graded on your completion of each of the 7 steps shown here and on the clarity of your presentation. Do not use the Excel file for presenting the response to the non-quantitative questions (e.g., the questions to the risk officers). It is not geared for that. Present these non-quantitative responses in one Word-format document. Your 1300 word essay also belongs in a Word-format document!
