To:

Students in ACC5400

From: Professor Barton

Re:

Audit Case 1 ABC Electronics

Date assigned: 10/19/2016

Date due: TBD, turn in via Blackboard

The purpose of this memorandum is to document the procedures and requirements for
Audit case 1: ABC Electronics. This case was adapted from article by Paul Clikeman and Jamie
Diaz. The American Accounting Association holds the copyright to the case, but extends
duplication permission for use in courses of instruction. All other uses are prohibited without the
explicit permission of AAA.
You will find all the background information required within this memo & the excel
spreadsheet provided, however, you may need to reference external materials regarding auditing
standards, etc. The final product of this case will be a memorandum addressing your answers to
the questions found herein. The memo should be in a concise and clear format, explaining not
only your conclusions but also how you reached those conclusions. Your memo should be single
spaced (with double spaces between paragraphs) with normal fonts and margins. There is no
page limit on this assignment, however, please be concise.
NOTE: You may work with a group of up to 5 people on this case (or work on this case
individually), but you may not share information (or written work) between groups while
working on this case. This will be considered plagiarism/cheating. You must submit this case
through Blackboard, and it will be screened using SafeAssign software, which will compare your
groups work on this case to the work of other groups & to all electronically accessible
information on the internet as a whole. Because of this, if you use sources (which I encourage
you to do), you must cite them. <<Also please note that attributing a quote to someone is not the
same thing as a citation and I will take points off for thisif you say the SEC chairman said
XYZ and dont cite a source, then you are failing to cite unless you interviewed the SEC
chairman personally >>
THE CASE: It is January 2014 and you are a staff accountant assigned to the 2013 audit of ABC
Electronics. ABC is a closely-held corporation managed by the founder and principal
shareholder, Adam B. Clark. Your firm has audited ABC for the last five years. The audited
financial statements for the years ended December 31, 2012 and 2011 are presented in the
attached excel spreadsheet, along with the clients unaudited financial statements for 2013.
Required: The engagement partner has asked you to perform preliminary analytical procedures
to identify potential risks and areas of audit focus in ABC Electronics 2013 financial statements.
Review the financial statements and identify accounts that appear to have unusual balances
compared with the prior two years. Prepare a written memorandum documenting:

1. The accounts whose balances appear anomalous and the reasons you identified them as
such. (Hint: you will not just want to look at year-over-year changes in balances, you will
also want to look at trends in common ratios, etc.)
2. The potential accounting issues or operating problems that might have caused the
unexpected fluctuations.
3. Particular aspects of the companys operations that you believe should receive special
attention during the 2013 audit.