Select a publicly traded domestic (U.S.) company with internal control weaknesses by reviewing the company’s latest Form 10-K Securities and Exchange Commission (SEC) filing and submit it to your...

The company selected: Apple Inc.
A
ief introduction
Apple Inc. has been selected as an entity to analyze the impact on financial statements due to operational and financial weakness. Apple Inc. was founded in 1976 by Steve Wozniak Ronald Wayne and Steve Jobs and is also listed on the NASDAQ stock exchange. The company is one of the largest organizations in the global fortune 500 and is headquartered in Los Altos, California. The company is operating across the globe and has more than 164000 employees. The total equity base of the group is $50.67 billion in the year 2022 and the auditor of the entity is Ernst and Young LLP (Sec 10 K report).
Analysis of financial and operational weakness of the entity and its impact on financial statement
The financial and operational weaknesses are the internal factors that are creating obstacles to the growth of the business and the consideration for the relative performance of the other business of technology. The financial and operational weakness of the entity is having a material impact on the financial statement of the entity. The detailed analysis of the weakness is as follows:
Intangible and the property plant and equipment of the entity require highly subjective assessment. The financial statement of the entity shows that the PPE and intangible assets may be overstated as they are having comparatively high valuations and large amounts compared to other assets. The high valuation of the PPE and intangible assets may lead to high depreciation and can have an impact in subsequent years as intangibles are balance sheet items. The high amount of depreciation can be used by the entity for tax savings purposes as it reduces the amount of net profit of the entity. Moreover, the high valuation of the assets can be used for showing the better financial position of the entity.
Moreover, the entity is having aged inventory. The surplus of the inventory stock is both costing the entity money and restricting the cash flow for the entity. In addition to this, the inventory of the entity is having higher valuation. This will lead to overstated P &L as the value of the inventory is high and this will misstate the income statement and balance sheet of the entity. Further, this will misstate the net worth of the entity and the users of the entity can be misled by the misstatement in the financial statement.
Moreover, the entity is dealing with various lawsuits, and the lawsuits are filed by the customers about the slowing down of the phones and the CPU rates being strangled. The entity is making a payment of $18 million for settling the lawsuit for disabling the application of the old models of phones.
The entity is having limited distribution network as the entity is selling the product by itself and there are very few scattered stores globally. This will also add to the burden of getting after-sales service as only apple stores will provide trustworthy service for their products. This will lead to limited market reach. This weakness exists despite various exclusive advantages for the entity such as strong control over the distribution of the products. This affects the sales of the entity and additional efforts are placed to increase the sales and this will lead to additional promotion costs for the entity.
In addition to this, the premium pricing strategy of the entity leads to the weakness of the dependence on the sales of the high-end market segments. The high prices of the entity are attracting high- and middle-income class customers but it fails to attract customers from low-income
ackets. The pricing and distribution strategies of the entity are imposing weaknesses in the business of the entity. The limited distribution network of the entity is causing higher operating costs for the entity. This affects the income statement of the entity as higher operating costs reduce the profitability condition of the entity.
In addition to this, the entity has been accused of using tracking applications on the phone and this reveals the precise locations of the users. The entity is under investigation for unfair practice and this will affect the shareholders of the entity and discourages potential investors from investing.
The misstatement of the income statement and balance sheet due to unfair decisions regarding the valuation will affect the financial position and performance of the entity. This will affect the decisions of the stakeholders of the entity as they are impacted by the misstated financial statement of the entity. The surplus of the inventory stock is both costing the entity money and restricting the cash flow for the entity. In addition to this, the inventory of the entity is having higher valuation. The high valuation of the PPE and intangible assets may lead to high depreciation and can have an impact in subsequent years as intangibles are balance sheet items.

Reference
Apple Inc. 2021. Sec 10 K report. Retrieved from https:
investor.apple.com/sec-filings/sec-filings-details/default.aspx?FilingId=16157374