NEEDS TO BE IN APA FORMAT 6TH EDITION, REFERENCES NEED TO BE IN APA FORMAT 6TH EDITION ACCT685-1301A-01 Review Course: Auditing and Regulation Assignment Name: Unit 4 Individual Project Deliverable...

Wells Fargo and Company
WELLS FARGO AND COMPANY – AUDITING ANALYSIS 1
Wells Fargo and Company
Auditing and Regulatory Analysis
[Type the author name]
08-Mar-13
Wells Fargo And Company – Auditing Analysis 2
Abstract
The company selected for analysis is Wells Fargo & Company (WFC). The
company is headquartered at San Francisco, California. The report is being analyzed of
2012Y i.e. for the year ending 12/31/2012. The Audit report for WFC qualifies the
Auditor Opinion. KPMG has been the auditor of the company for 2012Y. The
qualification included the understanding of the internal controls over financial
eporting for the company, thereby assessing the risk that any material weakness exists,
as well as testing and evaluating the overall design as well as operating effectiveness of
the internal control that are based on the assessed risk for the company. The major
strength of the internal control of WFC is that there is no material weakness in the
internal controls of the company. WFC had maintained a Whistleblower Scheme that
cu
ently uses mechanisms like Control and Self- Assessment Questionnaires that are
primarily signed by the senior managers for providing provide additional assurance.
Wells Fargo And Company – Auditing Analysis 3
Introduction
The company selected for analysis is Wells Fargo & Company (WFC). The
company is headquartered at San Francisco, California. The report is being analyzed of
2012Y i.e. for the year ending 12/31/2012. The Cu
ent Stock Price of the company is
$36.42 as of 07-Mar-2013. Wells Fargo had been one of the highest providers of the
credit to the economy of United States. Wells Fargo continued towards lending to the
creditworthy clients and, during the fiscal year 2012 the company made $675 billion in
the originated loan commitments towards the consumers, small firms as well as the
commercial customers, which included nearly $400 billion of the residential mortgage
originations of the company (WFC 10-K, 2012).
Wells Fargo had been an industry leader in the loan modifications and
estructuring for the homeowners. As of the year end 2012, in excess of 700,000
esidential and commercial mortgage customers of the company had been in the active
trial or had then completed their loan modifications through the commencement of
2012. The company also continued its support towards its communities through making
a massive charitable contribution of $400 million to the Wells Fargo Foundation in year
2012, covering more than three years of its estimated future funding (WFC 10-K, 2012).
Wells Fargo And Company – Auditing Analysis 4
Analysis
Wells Fargo earns income from the regular fees that it receives for the origination
of mortgage loans as well as for servicing of the mortgage loans. When there is a rise in
the interest rates, the demand for the mortgage loans in the market usually tends to
drop, thereby reducing the income the company receives from the origination of the
loans. Under the similar circumstances, sales from its mortgage service revenue can
increase through the increases in the fair value of its loan originations. Revenues for the
company are recorded as soon as they are realized.
Cash and Cash Equivalents of Wells Fargo included highly liquid securities
issues by government securities primarily the U.S. Treasuries. It also included
investments in the collective investment funds that are valued at the fair value based on
the anticipated market values of these underlying net assets. Each unit price of these
securities is quoted on the private market that has not been active; however, these unit
prices are based on the underlying investments that are traded on the active market.
The company also uses few other significant accounting policies. These are
described as follows:
1. Pension Accounting: The Company accounts for its defined benefit pension
plans by the help of an actuarial model.
Wells Fargo And Company – Auditing Analysis 5
2. Goodwill Impairment: Wells Fargo recognizes the losses of impairment as the
charge towards its noninterest expenses (until they are related to discontinued
operations of the company) as well as an adjustment towards the ca
ying value of its
goodwill asset.
3. Derivatives Accounting: Wells Fargo recognizes all its derivatives within the
alance sheet at the fair value rather than the book value.
4. Earnings per Common Share: Wells Fargo computes earnings per common
share by the division of net income by the avg. number of the common shares that are
outstanding during the particular year.
The Audit report for WFC qualifies the Auditor Opinion. KPMG has been the
auditor of the company for 2012Y. The qualification included the understanding of the
internal controls over financial reporting for the company, thereby assessing the risk
that any...