For each memo you will select a standard from the appropriate list and explain how it will affect your client’s audit. Here is how you do this:
1. Select a public company that you will be auditing. This should be a public company that will have financial statements available. Select a company you are interested in learning about for the semester.
2. Research your company sufficiently to understand its business model, products, customers, vendors and management/directors. Read the most recent financial statements to gain an understanding of the types of assets and liabilities on the balance sheet. Use the statements to be familiar with the sources of revenues and typical operating expenses. The 10-K will have this information. Use EDGAR to find the SEC filings at www.sec.gov and/or the company’s own web site under investor information.
3. Write a memo for each of the topics listed above.
4. The memo should be addressed to the Audit Committee Chair, the members of the audit committee, and the CFO. You will need to use their names, so research who they are. You may use the DEF 14 A (proxy statement) from EDGAR or the company’s web site to find this information. The memo is from you, as the Audit Partner.
5. For each memo choose a professional standard topic to research from the list given for each assignment above. For example: for Memo 1, you might research the topic of Audit Evidence (AS 1105). The topic is your choice; the only requirement is that it come from the list.
6. Research the appropriate standards at www.pcaobus.org. Read them and refer to the chapter material and any other resource to help you research and understand the requirements of the standard.
7. Write up the memo as a way of explaining to your client how the standard will be followed on the upcoming audit. For example, if you are auditing Walmart and you have selected the topic of Confirmations (AS 2310) you might write a memo that references the many accounts that must be confirmed because each store has one. Explain the document you will use for this and how the mailing will comply with the standard. If you chose the same standard for a company like Caterpillar, you would probably do less confirmation and can discuss similar details but referencing fewer accounts.
8. The memo should be one page. Do not include the verbiage of the standard in the memo. Reference the standard by number. The memo should be the explanation of the pertinent standard.
9. The memo will be graded for grammar, syntax, spelling, clarity, completeness, and all other writing skills detailed on the rubric. Remember, a memo may be all a client ever sees of you. If you don’t write it well, they will not trust your accounting skills. You may be the world’s best accountant; but if you can’t communicate about accounting that won’t matter.
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