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4. Four years after acquiring Skype, eBay sold most of its interest in the company.
Discuss how that impacts eBay's business risks.
EBay Inc. acquired Skype in 2005 for $2.6 billion but in 2007, eBay Inc. took a $1.4 billion
reduce in the book value of Skype, admitting that the procurement had not performed as
projected. Between 2005 and 2007, its stock price was cut in half and its market cap shrank by
$30 billion. In 2009 The Companys board decided to divest Skype due to a lack of
collaborations with the companys core businesses and its focus on commerce. EBay retained a
30% stake in Skype, safeguarding possible advantage to any future value formation. EBay
wanted to unload Skype after failing to integrate the company into its core operations, and was
now soliciting bids to cut its losses.
5. Identify possible risks that can lead to material misstatements in the eBay financial
statements if business risks related to its operations, including recent acquisitions
and divestitures, are not effectively managed.
Each of the possible business risks that can lead to material misstatements are:
1.
2.
3.
4.
May lead to an increased risk of material misstatements in the financial statements, if not
effectively managed.
Inadequate Ability to Grip Demand. If demand for products through the eBay Web site
exceeds the companys ability to process orders in a timely fashion, customers may cancel earlier
recorded orders or request returns when delivery take place well away from the expected
delivery date. The accounting systems must be planned to exactly reflect cancellations and
returns in a timely fashion in accordance with GAAP. Additionally, if the processing of orders is
significantly delayed, the accounting systems must be effectively planned to ensure sales are not
recorded in advance (e.g., not until delivery).
Customers Gratification with Product. While the autonomous sellers who offer products on
eBay auctions bear principal duty for product quality and feature, some customers may seek
financial reimbursement from eBay when products are not delivered or are in poor quality. Thus,
eBays financial statements may need to include reserves for product returns.
Consumer Secrecy. If consumer privacy is breached, existing sales may be lost or returns
beyond the normal period may be requested. Such activity would need to be properly reflected in
the financial statements. Additionally, legal exposures may increase, which may require
additional financial statement disclosures.
Internet Accessibility. The lack of Internet availability will may lead to penalties or fee
payments to online sellers who use eBay to sale goods and to those who wanting to place
advertisements on the eBay site. When the Internet is down, there may be fees owed to sellers
and advertisers.
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Group
no 2
Identify different control procedures and relater tests of control used in sales and payroll
department of trading concern.
Assignment
Ali is an auditor having satisfactory quality control review rating issued by institute of chartered
accountant Pakistan (ICAP). He has been appointed as an auditor of Model Manufacturing
limited. He has started work under the companys internal control environment and obtains
various assertions from the different executives and employees of the company. After going
through a preliminary assessment of the company environment, Ali feels that there is a problem
in the working of internal control system in handling the sales and debtors and payroll
departments. Now, he is planning to check the internal control procedures and tests of control.
Describe various appropriate internal control procedures and tests of control, Ali apply to
determine the strength of internal measures over the clients
Various appropriate internal control procedures and tests of control to determine the
strength of internal measures over the clients regarding sales and debtors and payroll
departments in accordance with my view point.
Orders
Dispatch
Invoicing and credit notes
Returns inwards
Receivables/debtors
Bad Debts
Orders:
Existing customers should be allocated a credit limit and it should be determined whether this
limit is to be exceeded if the new order is accepted. If so the matter should be referred to
credit control.
Any new customer should be referred to the credit control department before the order is
accepted.
All orders received should be recorded on pre-numbered sales order documents so that a
check can be made that all orders have been allocated with -a completeness check.
All orders should be authorized before any goods are dispatched.
The sales order document should be used to produce a dispatch note for the goods outwards
department. No goods may be dispatched without a dispatch note.
Dispatch:
Dispatch notes should be pre-numbered and a register kept of them to enable them to be
Sales invoices should be authorized by a responsible official and matched with the authorized
sales ledger control account. Batch totals should be maintained for this purpose.
Sales invoices and credit notes should be checked for prices.
All invoices and credit notes should be serially pre-numbered and regular sequence checks
functions.
Copies of cancelled invoices should be taken.
Any cancellation of an invoice should lead to a cancellation of the related dispatch note.
Cancelled (and free of charge) invoices should be signed by a responsible official.
Each invoice should differentiate between different types of sales and, if relevant, different
rates of VAT or sales tax. Any coding of invoices should be periodically checked
independently.
Returns:
Any goods returned by the customer should be checked for obvious damage and, when
accepted a document should be raised.
All goods returned should be used to prepare appropriate credit notes.
Receivables/Debtors:
A receivables ledger control account should be prepared regularly and checked to individual
statements.
Letters should be sent to customers for collection of overdue debts. A policy should be in
place for the Institution of legal proceeds where appropriate.
Bad debts
The authority to write off a bad debt should be in writing. Appropriate adjustments should be
Tests of Control
Tests of control should be designed to check that the control procedures are being applied and
that objectives are being achieved
Carry out sequence test checks on invoices, credit notes, dispatch notes and orders. Ensure that
all items are included and that there are no omissions or duplications.
Check the existence of evidence for authorization in respect of:
1. Acceptance of the order.
2. Dispatch of goods raising of the invoice or credit note
3. Pricing and discounts
4. Write off debtors as bad debts.
Check both that the relevant signature exists and that the control has been applied.
special leave)
Use of time clocks to record time worked.
Clock cards approved by supervisor.
Only employees with valid employee numbers are paid.
Payroll budgets in place and reviewed by management.
Pre-number clock cards in use.
department and changes are updated to the payroll master file quickly.
Independent approval and review of accounts charged to payroll.
Inspect the unclaimed wages book entries on the pay roll to ensure they agree check that
unclaimed wages are banked regularly by inspection of bank statements and supporting
documentation.
Inspect that unclaimed wages books to check it shows reasons why wages are unclaimed.
Review pattern of unclaimed wages in unclaimed wages book for variations.
Check the calculation of the holiday payments by recalculation.
Make comparisons on holiday pay between payment records.
Recalculate benefits and deduction for a sample of employees.
Inspect documentation for evidence of managements review.
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Scope paragraph
Opinion
Opinion
Emphasis of matter
Report on Other legal and As required by the Companies (Auditors Report) Order, 2003 (the
Regulatory Requirements
Order) issued by the Central Government in terms of Section
227(4A) of the Act, we give in the Annexure 1. A statement on the
matters specified in paragraphs 4 and 5 of the Order. 2. As required
by Section 227(3) of the Act, we report that: We have obtained all
the information and explanations Which to the best of our
knowledge and belief were necessary for the purposes of our audit.
In our opinion, proper books of account as required by law have
been kept by the Company so far as it appears from our
examination of those books. The Balance Sheet, the Statement of
Profit and Loss, and the Cash Flow Statement dealt with by this
Report are in agreement with the books of account. In our opinion,
the Balance Sheet, the Statement of Profit and Loss, and the Cash
Flow Statement comply with the Accounting Standards referred to
in Section 211(3C) of the Act. On the basis of the written
representations received from the directors as on June 30, 2013
taken on record by the Board of Directors, none of the directors is
disqualified as on June 30, 2013 from being appointed as a director
In terms of Section 274(1) (g) of the Act.
report
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