Description
For the final project, you will work through components of a case study in which you will assume the role of a lead auditor at Willis & Adams. Your firm has been approached by EarthWear Clothiers to perform an audit. In your role as lead auditor, you will perform management duties. You will evaluate internal and external factors to determine client engagement, develop an audit plan, determine recommendations for improving internal controls, and communicate the audit opinion. For this milestone, you will develop the audit plan.
Prompt: Your organization has decided to move forward with the audit of EarthWear Clothiers. As lead auditor, you will select one of EarthWear Clothiers’ business objectives and create an audit plan of their financial statements.
The business objectives are:
Expand further into the global market by launching internet sites into South American countries
Increase customer base by introducing a new extreme sports product line to attract younger consumers
Reduce pricing to be more competitive in the marketplace by seeking out additional vendor relationships to lower costs of goods sold
Implement an employee stock purchase plan to increase productivity and employee morale
Reduce delivery and distribution time of products and services by adding additional warehouse locations
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Explanation & Answer
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Running head: TRINITY INDUSTRIES
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Trinity Industries
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TRINITY INDUSTRIES
Trinity Industries
The Trinity Industries was described as the most competitive firm during its first year of
Sarbanes-Oxley (SOX). Despite the presence of several organizations that were successful and
consistently improving, they were able to run into problems like other companies when compliance
was put in place. The failure of these industries was due to the lack of the required processes and
documentation of control plans (Schultze, 2011). They did not have the required evidence that
there were any performance controls. The critical element to the decisive success of the company
was during the compliance year that included standardization of the reporting system, analysis of
the gap to SOX compliance, documenting the control system and recommendations for closing the
gap. Additionally, there was monitoring of control systems, training of employees in every level
and assertions of management that were supposed to be fixed.
Preparation of reliable and accurate financial report in a fashion that is timely comes when
there is an internal control that has been put in place, and they are working effectively. The major
internal controls are critical to achieving this mission because they have the documentation
showing that there is an existence of performance control. It does not just rely on any list of
transactions that have been all completed. Additionally, another vital form of control are systems
that help in ensuring that there are recordation and authorization of all procedures that will be
followed in every financial transaction (PCAOB 2016). The processes of transactions can address
fraud risks as stated in the Auditing Standard Number Five.
A material weakness is defined as a deficiency found in internal controls that finally lead
to the reasonable possibility of misstatement of a material that is not able to detect or prevent an
error early. Some of the material weakness specific for Trinity include documentation of
performed controls (Rodengen, & Lieber, 2002). This is due to the different environments that
TRINITY INDUSTRIES
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