More handpicked essays just for you.
Literature review on internal control
Literature review on internal control
Auditing:generally accepted auditing practice
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Introduction:
We have been engaged to audit the financial statements for Exxon Mobil Corporation (ExxonMobil) and assess the effectiveness of their internal controls for the fiscal year ended December 31st, 2010 in compliance with the laws of the state of Texas and the standards set forth by the Public Company Accounting Oversight Board (PCAOB). In the previous memo sent, we outlined the client’s high inherent risk due to the account balances and transactions, foreign currency translations and the complexity of accounting for and auditing the client’s vast oil reserves and inventories. This memo will address preliminary assessment of control risk and the appropriate level of detection risk given the forgoing conclusions on inherent risk, audit risk and control risk.
Assessment of Control Risk:
The report on internal controls, according to ExxonMobil’s CEO, Treasurer and Controller, states they are solely “responsible for establishing and maintaining adequate internal control over (ExxonMobil’s) financial reporting.” They evaluated the effectiveness of internal controls over financial reporting based on COSO’s framework and concluded that controls were effective (MD&A, F-22). The report in internal controls acknowledged us—ExxonMobil’s independent public accounting firm PricewaterhouseCoopers LLP (PwC)—stating that the Corporation maintained effective internal control over financial reporting for 2009 and 2010 as it is the responsibility of management to maintain and assess its effectiveness. We, PwC, are responsible only to express an opinion on internal controls, which we opined in 2009 as unqualified (MD&A, F-22).
ExxonMobil has had nothing major in 2010 that could impair the low levels of control risk assessed by our a...
... middle of paper ...
...ear-end. In terms of extent, we can perform the audit without a substantially high number of samples while remaining effective at the same time.
For any questions or requests for additional information, please contact me at (202) 123-4567 or at Omar.Ali@PWC.com.
Works Cited
Exxon Mobil Corporation Amended Form 10-K/A. (22 Feb, 2011). Retrieved on 20 Nov, 2011 from EDGAR database
Exxon Mobil Corporation Financial Statements and Supplemental Information. (31 Dec, 2010). Retrieved on 17 Nov, 2011 from
Gambrel, Jon. “Nigerian Rebels Seize Seven Oil Workers”. Sydney Morning Herald. Retrieved on 21 Nov, 2011 from
Home Depot Internal. (2010). Corporate Financial Overview. Retrieved April 7, 2011, from Home Depot: http://corporate.homedepot.com/en_US/Corporate/Public_Relations/Online_Press_Kit/Docs/Corp_Financial_Overview.pdf
Form 10-K Chipotle Mexican Grill, Inc. (2011, February 17). Retrieved March 15, 2011, from U.S. Securities and Exchange Commission: http://www.sec.gov/archives/edgar/data/1058090/000119312511039010/d10k.htm#tx129308_27
The Clorox Company. (2014, February 4). The Clorox Company Reports Slight Sales Growth on Top of Strong Year-Ago Results; Updates Fiscal Year 2014 Outlook. Retrieved March 21, 2014, from http://investors.thecloroxcompany.com/releasedetail.cfm?ReleaseID=822888
Saundry, Peter. "Exxon Valdez oil spill." Exxon Valdez oil spill. 9 June 2010. The Encyclopedia
Pratt, Joseph A. “Exxon and the Control of Oil.” Journal of American History. 99.1 (2012): 145-154. Academic search elite. Web. 26. Jan. 2014.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
The Clorox Company. (2014, February 4). The Clorox Company Reports Slight Sales Growth on Top of Strong Year-Ago Results; Updates Fiscal Year 2014 Outlook. Retrieved March 21, 2014, from http://investors.thecloroxcompany.com/releasedetail.cfm?ReleaseID=822888
“Price-Earnings Ratio – P/E Ratio.” Investopedia. Investopedia US, A Division of IAC., n.d. Web. 25 March 2014.
(6) Hinton, Sean. (2008, March). General Electric Company (GE). Wikinvest Retrieved March 3, 2008, from http://www.wikinvest.com/stock/General_Electric_Company_(GE)
Williams, James L. "Crude Oil Futures Prices - NYMEX." WTRG Economics. 01 Apr. 2011. Web. 02 Apr. 2011. .
Annual Report 2012 Costco Wholesale: Year Ended September 2, 2012 [PDF document]. 1-7. Retrieved from Costco Wholesale Financial Reports:
Nossiter, Adam. “In Nigeria, a Deadly Group’s Rage Has Local Roots.” The New York Times.
The COSO Internal Control—Integrated Framework provides a blueprint for implementing an internal control system to assist in ensuring the reliability of financial statements and compliance with Sarbanes-Oxley legislation. The purpose of internal control is to provide reasonable assurance in achieving internal control objectives: Effectiveness and efficiency of operations Reliability of financial reporting Compliance with laws and regulations
Winston A, 2010, Five Lessons from the BP Oil Spill, Harvard Business Review, accessed 1 April 2014,
The measure of petroleum abundance and production in Nigeria is measured by the United States. According to the statistical data and the U.S. measures, Nigeria reserves make the country the tenth petroleum-richest nation, and by far, one of the most affluent countries in Africa. In the middle of 2001 its crude oil production was averaging around 2.2 million barrels per day. Though, there is a very prominent market for offshore rigs, nearly all of Nigeria’s primary reserves are in and around the delta of the Niger river. Ever since Nigeria became independent, it is one of the few oil producing countries that can increase its oil output drastically. The g...