A.01 Internet Problem (Worksheet 8)

Shelly Huzaynah 21207019


Auditing 2

Question :

The vignette at the beginning of Chapter 6 in the text contains a brief description of the ZZZZ Best fraud. One area where the auditors were particularly criticized in that audit had to do with the auditors’ lack of industry knowledge. With hindsight it appeared that the fraud should have been easily detected because ZZZZ Bests’ large restoration contracts were in excess of $7 million while the largest restoration jobs on record in the insurance restoration industry were less than $3 million.

You have been approached by On the Sunny Side, a team sports uniform designer and manufacturer for women, about performing the company’s financial statement audit. The company began operations eight years ago and has experienced strong growth in the last several years. Teri Kloth, the chief executive officer, has told you that her company expects production in 2004 to be 450,000 units. She also provided summary historical financial and operating data regarding unit sales. In   2002 and 2003, the company reported sales of 365,000 and 402,000 units, respectively.

Are On the Sunny Side’s 2002 and 2003 unit sales reasonable? Why or why not? (Hint: Visit the U.S. Census Bureau’s web site. Once you are at the site, go to the “Business” section and then to the “Manufacturing” sector-specific data section. Once you are there, locate the Current Industrial Reports. Next search the CIRs by Subject Title for Apparel. Data about women’s team sports uniforms can be found by search for “Apparel.” Use the most current annual report for your analysis.

Answer :

Based on the annual report, the unit sales of woman’s team sports uniforms of On the Sunny Side is reasonable. And the expects production in 2004 to be 450,000 units, which told by Teri Kloth, the chief executive officer is fairly present, because based on the summary historical financial and operating data regarding unit sales in 2002 and 2003, the sales is increase. So there is a chance to make the sales increase more in 2004.

Question :

Internet Problem 8-2 (Obtain Client Background Information)

Planning is one of the most demanding and important aspects of an audit. A carefully planned audit increases auditor efficiency and provides greater assurance that the audit team addresses the critical issues. Auditors frequently prepare audit planning documents that provide client and industry background information and discuss important accounting and auditing issues related to the client’s financial statements.

Your assignment is to find and document information for inclusion in the audit planning memorandum. You should obtain the necessary information by downloading a public company’s most recent annual report from its web site (your instructor will give you the company’s name). You may also use other sources of information such as recent 10-K filings to find additional information. You should address the following matters in four brief bulleted responses:

  • Brief company history.
  • Description of the company’s business (for example, related companies and competitors).
  • Key accounting issues identified from a review of the company’s most recent annual report. (Note: Do not concentrate solely on the company’s basic financial statements. Careful attention should be given to Management’s Discussion and Analysis as well as the Footnotes.)
  • Necessary experience levels (that is, years of experience and industry experience) required of the auditors to be involved in the audit.

Answer :

  • Brief company history.

The idea for Logitech was spawned in 1976 at Stanford University, in Palo Alto, Calif. While enrolled in a graduate program in computer science at Stanford, Daniel Borel and Pierluigi Zappacosta formed a friendship that would become a business alliance. While completing their education, Borel, a Swiss, and Zappacosta, an Italian, identified an opportunity to develop an early word-processing system. The pair spent four years securing funding and eventually built a prototype for the Swiss company Bobst.

Shortly thereafter, Borel and Zappacosta joined forces with Giacomo Marini, a former Olivetti engineer and longtime friend of Zappacosta, on a second venture. The three eventual founders of Logitech began work as consultants in publishing-related software development and hardware architecture. Ricoh awarded them a four-month contract for a feasibility study on developing a graphical editor.

With this initial funding in hand, Borel, Zappacosta and Marini founded Logitech S.A., on Oct. 2, 1981, and opened its first office in Apples, Switzerland. Originally, it was to be named Softech because of the software background of the three founders. Since this name was already registered, the founders chose Logitech, using the root of the French word for software: “logiciel.”

Zappacosta led a feasibility study from the back yard of a farm in Apples that served as Logitech’s first office. In January 1982, the Logitech team showed Ricoh management a prototype. Ricoh agreed to move forward on the project and tasked the Logitech team with most of the software development. Shortly thereafter, the trio opened Logitech’s first U.S. office, at 165 University Ave. in Palo Alto, Calif., to be close to Ricoh’s development office in nearby San Jose.

  • Description of the company’s business (for example, related companies and competitors).

Logitech International S.A. is a global leader in peripherals for personal computers and other digital platforms, developing and marketing innovative products in PC navigation, Internet communications, digital music, home-entertainment control, video security, interactive gaming and wireless devices. For the PC, the Company’s products include mice, trackballs, keyboards, gaming controllers, multimedia speakers, headsets, webcams and 3D control devices. For digital music devices, the Company’s products include speakers, headphones, earphones and custom in-ear monitors. For gaming consoles, the Company offers a range of controllers and other accessories. In addition, Logitech offers wireless music solutions for the home, advanced remote controls for home-entertainment systems and PC-based video security systems for a home or small business. The Company generates revenues from sales of its products to a worldwide network of retail distributors and resellers and to original equipment manufacturers (“OEMs”). The Company’s sales to its retail channels comprise the large majority of its revenues. For the fiscal year ended March 31, 2009, the Company generated net sales of $2.2 billion, operating income of $109.7 million, net income of $107.0 million, employed approximately 6,400 employees and conducted business in over 100 countries.

Logitech operates in a single industry segment encompassing the design, manufacturing and marketing of personal peripherals for personal computers and other digital platforms. Our research and product management teams are organized along product lines, and are responsible for product strategy, industrial design and development, and technological innovation. Our global marketing and sales organization helps define product opportunities and bring our products to market, and is responsible for building the Logitech brand and consumer awareness of our products. This organization is comprised of retail and OEM sales and marketing groups. Our retail sales and marketing activities are organized into three geographic regions: Americas (including North and South America), Europe-Middle East-Africa (“EMEA”), and Asia Pacific. Our OEM sales team is a worldwide organization with representatives in each of our three regions. Our OEM customers include the majority of the world’s largest PC manufacturers. A summary of our net sales and long-lived assets by geographic region can be found in Note 18 to the Consolidated Financial Statements in Item 15, which is incorporated herein by reference. A discussion of factors potentially affecting our operations is set forth in Item 1A Risk Factors, which is incorporated herein by reference.

Since 1994, we have had our own manufacturing operations in Suzhou, China, which currently handle approximately half of our total production. We outsource the remaining production to contract manufacturers and original design manufacturers located in Asia. Both our in-house and outsourced manufacturing is managed by our worldwide operations group. The worldwide operations group also supports the business units and marketing and sales organizations through management of distribution centers and of the product supply chain, and the provision of technical support, customer relations and other services.

  • Key accounting issues identified from a review of the company’s most recent annual report.

Over the last several years, Logitech have broadened product offerings and the markets in which they sell. Our product expansion has been primarily organic, but we have also grown as a result of a limited number of acquisitions that expanded our business into new product categories. In light of the current global economic situation, we will continue to evaluate our strategy related to our product offerings.

  • Necessary experience levels required of the auditors to be involved in the audit.

The experiance level required of the auditors to be involved in the audit process, they must understand the auditing technic to increase their ability. Such as, Auditing Around the Computer, Auditing Through the Computer, and Auditing with the Computer.

Source :






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