Question one
The coca cola Enterprise was incorporated in Delaware 2010. Additionally, it is a publicly traded firm that is listed in New York Stock Exchange. It is a marketer, distributor, and producer of the nonalcoholic drinks of Coca-Cola Company via a licensed territory agreements in Belgium, great Britain, Monaco, and Sweden (2015 Annual Report:23). The coca cola Enterprise Inc. acts as the anchor bottler in West Europe, and North America. The products of Coca-Cola Enterprise Inc. are Diet Coke, Sprite, Fanta, and Coca-Cola among others. Its primary strategy is to be the bottling partner in Western Europe as well as one of the largest independent Coca-cola bottler around the globe. The company has the bottling rights within its territories for different beverages.
The objectives of coca cola enterprise Inc. are to be the lead category regarding growth, to excel while serving its clients within the world-class capabilities, and to drive an inclusive and passionate culture. The strategic vision of the enterprise is to be leading beverage seller, and a service firm. Therefore, to accomplish this strategy, the company is looking to operate its framework while serving as its compass to steer the key priorities, behaviors and actions. However, it refreshed its framework in 2014 to adapt to the changing markets and the society in which it operates with a dynamic customer landscape. For the coca cola enterprise to serve its owners while achieving the missions, the operating framework is inclusive of the mission statement and the targeted set of main objectives.
Question two
According to the clarified auditing standards, the quantification of materiality levels is needed to estimates and guides the decision of the auditors while designing the audit procedures. Therefore, the estimate is a guide and not a specific determination of either what is or not material in an audit. In determining the materiality, the percentage factor that relies on the risk at the financial statement should be multiplied by the planning materiality to obtain the tolerable misstatement or the performance materiality. This is the maximum value of the known error an auditor may accept in the financial statement without any adjustment (Perry).
The qualitative factors that may influence the auditor’s decision are:
The potential impact of the misstatement on the profitability trends.
A misstatement that may change a loss into income.
The influence of misstatement on the segment information about the financial statements.
Question three
The net sales declined by about 15% in 2015 to $ 7 billion from $ 8.3 billion in 2014. However, the net sales increased by 0.5% in 2014 (2015 Annual Report: 28). Both accounts payable and accrued expenses declined by $ 120 due to the decrease in customer marketing agreement accruals. But currently, the modern part of debt fell by almost 28% in 2015.
The analytical procedure is as follows:
Seek for the client acceptance/continuance, conduct preliminary engagement activities, Plan the Audit, Consider and audit internal control, Audit business processes and related accounts, Complete the audit, and Evaluate results and issue audit report. Both balance sheet and the income statement depend on the net income of the company, the shareholders’ additional investment in the enterprise, and the withdrawals of the owners from the business. Therefore, if the shareholders failed to invest or withdrew, the change in owners’ equity will be the value of net income earned by the corporation.
Question four
According to above relationship in question three, the connection that between the statement of financial position and the income statement is as a result of the application of double entry bookkeeping, and the accounting equation; Assets= Liabilities+ Owners’ Equity.
Question five
Expenses, the cost of goods sold, net sales, assets, liabilities are some of the high-risk accounts from both balance sheet and income statement. For instance, the sales level need to be compared to the year on a monthly basis with the previous years to reconcile the quantities of goods bought and sold. These accounts are of high risk to the auditor because they involve daily transactions, and for this reason, they have several changes to provide relevant evidence of completeness of income.
Question six
Occurrence. All transaction that has been recognized in the financial statements should have occurred and related to the accounting entity.
Completeness. All expenses such as wages in respect of all employees should be fully accounted for in during preparation of financial statements.
Accuracy. All values in these risky accounts should be calculated correctly while other adjustments such as tax deductions should also be reconciled.
Existence. All assets, liabilities, and equity need to exist at the end of the financial period.
Classification. The cost of wages should be allocated fairly between the operating expenses that have been incurred during production, and general & administrative expenses.
Question seven
The coca cola enterprise conducted its audit in agreement with the standards of the PCAOB- United States. The standards required the company to plan and perform the audit to get reasonable assurance regarding the effective internal control over the financial reporting. However, the company did not include all information and the footnotes as the requirement of GAAP for complete financial statements. The entire adjustments concerning the normal recurring accruals were considered necessary for fair presentation (2015annual report: 37). The consolidated financial statements also include all entities that coca cola is controlling through ownership of a majority voting interest.
Question eight
The related parties are coca cola Iberian partners, coca cola Erfrischungsgetrianke, and TCC. While identifying the parties, determine if: they have control or joint control over the reporting entity, significant influence over the reporting entity, it is a member of key management personnel of the reporting entity. That is a parent of the reporting entity.
Question nine
Standard Unqualified Audit Report because it has a title, address, introduction, scope, opinion, explanation, name of the auditing firm, and date of the report (Messier, Glover and Prawitt: 613).
Question ten
The total revenues or net sales was recognized by the coca cola enterprise Inc. after fulfilling the following requirements:
The existence of binding evidence arrangements regarding the general, and purchase orders.
There is a delivery of all products. Therefore, there is no requirement of future performance.
The collectable amounts are under the normal payments terms. The revenue is further stated as net sales discounts and marketing as all incentives are paid to the clients.
Bibliography
"2015 Annual Report". United States Security and Exchange Commission. FORM 10-K Coca-Cola Enterprise Inc. (2015): n. pag. Print.
Messier, William, Steven Glover, and Douglas Prawitt. Auditing and Assurance Series: A Systematic Approach. 9th ed. New York: McGraw-Hill Education, 2014. Print.
Perry, Larry. "Auditing Special Purpose Frameworks: Materiality Levels". Accounting WEB. N.p., 2014. Web. 29 June 2016. <http://www.accountingweb.com/aa/auditing/auditing-special-purpose-frameworks-materiality-levels>.
