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Microsoft Audit Planning - 8 Steps

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´╗┐AUDITING ASSIGNMENT ACC 203 MICROSOFT INC THE OVERALL OBJECTIVE OF AN AUDIT ON MICROSOFT INC PRIOR TO THE FIRST STEP OF AUDIT PLANNING STEP 1: CLIENT ACCEPTANCE & PERFORM INITIAL AUDIT PLANNING STEP 2: UNDERSTAND MICROSOFT?S BUSINESS AND INDUSTRY STEP 3: ASSESS CLIENT?S BUSINESS RISK STEP 4: PERFORM PRELIMINARY ANALYTICAL PROCEDURES STEP 5 SET MATERIALTY AND ASSESS AUDIT ACCEPTABLE RISK AND INHERENT RISK STEP 6 ASSESS CONTROL RISK STEP 7 GATHER INFORMATION TO ASSESS FRAUD RISK STEP 8 DEVELOP OVERALL AUDIT STRATEGY AND AUDIT PROGRAM TIMELINE FOR COMPLETION OF AUDIT ASSIGNMENT REFERENCE LIST APPENDIX TABLE ________________ THE OVERALL OBJECTIVE OF AN AUDIT ON MICROSOFT INC PRIOR TO THE FIRST STEP OF AUDIT PLANNING ?The objective of an audit of financial statements is to enable the auditor to express opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework? (IFAC Handbook 1998)[1] . These phrases are used as an expression of an opinion on the ?true and fair view?, or ?fairly presented? of financial statements. In order for us to form and give an opinion, we must perform audit procedures which are designed to obtain sufficient audit evidence to support the opinion. We must have an adequate audit plan; a plan which are properly executed according to professional standards, sufficient competent evidence collected and all questionable findings were pursued. We will starts with the financial statements (Form 10K, Sec Filing)[2] prepared by our client, Microsoft INC and submitted to SEC (Form 10-K Filing) as at fiscal year ended 30 June 2013. In these financial statements, management has made assertions about the classes of transactions and related accounts, completeness of an account and valuation of an account. We must obtain sufficient evidence that the assertion is materially true and gather evidence that accounts are classified correctly and proper disclosures have been made based on International standards. ...read more.


Normal value: 1 or more. 3. Cash ratio 1.93 2.06 +0.13 Cash ratio is calculated by dividing absolute liquid assets (cash, cash equivalents and short-term investments) by current liabilities. Normal value: no less than 0.2. For the whole period reviewed, the current ratio was observed to grow slightly from 2.60 to 2.71 (+0.11). On the last day of the period analysed (30.06.2013), the ratio demonstrates a very good value. The quick ratio was equal to 2.56 on the last day of the period analysed. The quick ratio increased slightly (by 0.15) for the whole period reviewed. The value of the quick ratio can be specified as very good on 30 June, 2013. This means, Microsoft Corporation is seen to have a normal relationship between liquid assets (current assets minus inventory) and current liabilities (liabilities with a maturity of less than 1 year). Liquidity ratio of Microsoft shows us that on an average, Microsoft is able to settle its debts in the event of liquidation smoothly. They also have its ability to cover its short term assets into cash in the event of emergency and in a quick manner. Similar to the two previous ratios, the cash ratio has a normal value (2.06) on 30 June, 2013 which demonstrates that the company has enough liquid assets (cash and cash equivalents) to meet current liabilities. Profitability ratios Value in % Change (col.3 - col.2) 2011/12 2012/13 1 2 3 4 1. Gross margin. 76.2 74 -2.2 2. Return on sales (operating margin). 30.2 34.7 +4.5 3. Profit margin. 23 28.1 +5.1 Reference: Interest coverage ratio (ICR). Normal value: no less than 1.5. ? ? ? The profitability ratios given in the table have positive values as a result of the profitability of Microsoft Corporation's activities during the whole period analysed. The gross margin equalled 74% for the last year, that is somewhat lower (-2.2%) than the gross margin for the same period of the prior. ...read more.


* Re-performance of the controls Objective: To check if the control is effectiveness, if yes, less substantive testing. Phase 2: Perform Testing (time allocated 50% of total time allocated) * Test of Transactions on Sales and Receivable cycle, payments and purchases cycle, inventory and warehousing cycle, acquisition and capital cycle. * Test on Balances on Sales and Receivable cycle, payments and purchases cycle, inventory and warehousing cycle, acquisition and capital cycle. * Perform Analytical Procedures by making observation * Precede more on compliance testing to make sure that their internal controls are consistent and minimal fraud risk. Objective: To check for any possible misstatements over financial reporting, if no, check for contingent liability and commitment. Phase 3 & 4: Reporting & Closure (time allocated 25% of total time allocated) * Re-perform Analytical Procedures on each cycle to have final review of the report * Perform additional test for presentation and disclosure (Check if there is any contingent liability or commitment); contingent liability has to be disclosure while commitment has to be adjust. * Accumulate final evidence * Evaluate results (Qualify or Unqualified or Unqualified with explanatory notes or adverse/disclaimer) * Issue audit report * Communicate with audit committee and management Any computers that assist audit techniques may be used to test automated controls or data, Reports produced by IT may be used to test the effectiveness of IT general controls. ?SAS 80 (AU 326) and SAS 109 (AU 319) provide guidance for auditors of entities that transmit process, maintain, or access significant information electronically?. It is designed to satisfy transaction-related and balance-related objectives and each transaction cycle will likely be evaluated using separate set of audit program. 3,650 words TIMELINE FOR COMPLETION OF AUDIT ASSIGNMENT TIMELINE FOR AUDIT PROJECT WEEK 2 , 12.10.13 WEEK 3 , 16.10.13 & 19.10.13 WEEK 4, 26.10.13 WEEK 5-9, 06.11.13- 27.11.13 WEEK 10, 03.12.13 INTRODUCTION TO PROJECT TASKS SPLIT UP HEAVY MATERIAL, FOCUS ON AUDIT PLAN FINAL TOUCH UP PROJECT SUBMISSION * ADMIN DETAILS * FOCUS AREAS * Q3 (16.10.13) * Q4 (19.10.13) * Q5 (22.10.13) * Q6 (26.10.13) * Q7 (06.11. ...read more.

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