ACC 640 - Auditing: Need a draft (4-5 pages) of risk factors as identified for all of the major...

Question

ACC 640 - Auditing: Need a draft (4-5 pages) of risk factors as identified for all of the major business transactions conducted by your chosen company, Kroger Company. Analyze the income statement, balance sheet, and cash and revenue for any potential risk factors and compliance issues with Generally Accepted Accounting Principles (GAAP) or International Financial Recording Standards (IFRS). Based on your analysis of risk, devise a statistical and judgmental sampling program for the audit universe. Recommend the most preferable audit testing procedure based on the audit universe items sampled. the following critical elements must be addressed:
A. Analyze the income statement for any potential risk factors and compliance issues with Generally Accepted Accounting Principles (GAAP) or International Financial Recording Standards (IFRS).
B. Analyze the risk factors and compliance issues with GAAP or IFRS on the balance sheet.
C. Using the internal control, analyze the cash and revenue for potential risk factors.
1. What risks need to be documented?
2. How does this information compare to the company or industry averages, or the company’s past performance? D. Explain the audit universe and how you identified it.
E. Based on your analysis of risk, devise a sampling program for the audit universe.
F. Choose the most preferable audit testing procedures that could be used in the field, based on the audit universe items sampled in this situation.

David · Accepted Answer

Kroger Company is a United States based company. The company is engaged in the retail 
business. The company was established in the year 1883. The management of the company 
believes in manufacturing the goods themselves and selling them to the customers. This will help 
the company in maintaining the quality level of the goods with keeping the cost at the lower 
level and maintaining the profit for the company. The management as result of this innovative 
thought has cross the revenue mark of $110 billion and became the largest retail company in the 
country in the year 2015.  The company is operational through the help of subsidiaries, super 
markets and retail chains. The headquarters of the company is established in the downtown 
Cincinnati.  
At times of preparation of the financial statements for the company, the management is required 
to prepare the financial statements in line with the generally accepted accounting principles 
(GAAP) where they are required to make necessary estimates and assumptions that will help at 
times of reporting the numbers for assets, liabilities, income and expenses. As per the audit report 
that has been provided by the auditor of the company, the management of the company has 
complied with the guidelines of GAAP and the financial statements of the company are prepared 
in line with these standards. Thus, relying on the audit report of the company, it looks like that 
the company is complying the GAAP provisions. 
The income statement of the company is subject to make risk factors and these risk factors are 
interdependent on each other and one may give rise to certain other risk numbers. These risk 
factors may affect the thought process of the investors as well of the other stakeholders and share 
holders of the company. 
 Risk related to the economic conditions: Being Kroger is a big group and is likely to 
affect with the spending power of the consumers. Any change in the business climate and 
the trend for the spending of the consumer may affect the sales volume of the company in 
big numbers. 
 Interest Rate Fluctuations: Any change in the interest rate of the company is likely to 
impact the income statement of the company in long run.

ACC 640 - Auditing: Need a draft (4-5 pages) of risk factors as identified for all of the major business transactions conducted by your chosen company, Kroger Company. Analyze the income statement,...

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