Explain How You Would Conduct The Audit Process

Describe how you would conduct the audit process, incorporating the analytical procedures you would use to investigate a selected business transactions.

In order to conduct an audit process and evaluate Amazon.com, inc., must be reviewed financial and none financial data for the main customers’ components, such as: Amazon Marketplace, Amazon Prime and electronics. The purpose of this project as an audit is to provide the independent and objective assurance that operations within the company satisfy GAAP requirements. For each component we need to consider the following factors: nature, timing and extent.

Evaluation will include the current and prior industry data as well as analytical procedure based on the client determined expected results. The financial data from previous years will be used in order to support the decision. The examination will include the review of cash, tangible fixed assets, securities, notes receivable and

inventory. Also comparison of the amounts recorded in the books or ratios of those amounts. Once this data evaluated, it is possible to see potential risks, which could influence the company during auditing thus mitigate audit outcomes.
What steps will you take to review the company’s business transactions?
In order to review companies business transactions, the audit must analyze the general ledger, trial balances from prior quarters, recently purchased fixed assets, stocks and options that company offers and review bank information.

Also it is very important to see within these areas if company has the accurate audit trail by tracking the financial data from the general data to the source of the financial transaction with specific documentation.

What would your plan be to utilize these procedures?

In order to utilize these procedures the audit must cross-reference the accounting system within each service industry by evaluating the data and how does it entered. By completing the basic audit of the financial statements it is possible to see if the account balances are correctly recorded. In this case the audit must review completeness, presentation and disclosure, existence or occurrence, valuations or allocation, right and obligations.

Explain the appropriate fields work needed to review high-risk business transactions for cash and

revenue.
There are two kinds of audit risk company might be facing to that will cause bad audit opinion, where financial statements are materially misstated. Inherent risk is the assessment of the potential material misstatements in account balance prior considering the effectivness of internal control. However the control risk is the risk that can be failed to prevent or identify and fix a material misstatement of the financial statements. Changes in the marketplace and internal environment delivers more risk because of the expanding operations, regulatory demands and additional focus on cost savings among all areas of the organization.
What would you need to do in the field to investigate?
It is important to investigate within each service transactions related to marketplace accurately recorded, if customers receive their orders. Also review if goods were on hand shipped and transactions were recorded accurate accounting period. Analyze the inherent risks of material misstatements in the revenue cycle. Analytically compare current relevant financial ratios or prior year ratios. Evaluate and analyze the outcome of the services internal controls of the company’s financial reporting. Perform a substantive test to review vendor invoices and bank statements to support a recorded expenses.
Could you convey this information through charts or other supporting documentation?
The auditor is responsible to report information found within internal audit by verbally communicating on the outcomes to senior manager and provide a draft of the competed report of the audit. In this document auditor would identify the items evaluated, note any issues, performances were taken to address them and conclusion. In addition must be included schedules for analysis, trial balance, summary of procedures and outside documentation.
Create a test to assess appropriate assertions for designated high-ris business transactions.
In order to identify and evaluate the risk to these transactions it is important to create the following tests:
Occurrence – transactions in financial statements occurred in the accounting period.
Completeness – all transactions that must be recorded, have been recorded.
Accuracy – transactions have been recorded with correct amounts.
Classification – transactions were recorded in the related accounts.
Cutoff – related to transactions in the accounting period which is under review.
In order to analyze the consistency among the transactions it is important to sample test account reconciliations, accruals and manual journal entries by using assertions mentioned above. By using these evaluations it is possible to compare from one documents to another, following the flow of the transaction to test for completeness and existence. It will confirm if internal control operates as expected.
References:
Amazon Annual Report (December 31, 2017)
https://www.sec.gov/Archives/edgar/data/1018724/000101872418000005/amzn-20171231x10k.htm
Key Considerations for your internal audit plan (May 1, 2013)
http://www.ey.com/Publication/vwLUAssets/EY_Key_considerations_for_your_internal_audit_plan_1/$FILE/ATT5QP7A.pdf
In Depth Guide to Public Company Auditing – Center for Audit Quality. (May 1, 2011)
https://www.pwc.com/us/en/audit-assurance-services/assets/in-depth-guide-to-public-company-auditing.pdf