Accounting Assignment: Walmart Financial Analysis

DETAILED INSTRUCTIONS:

Obtain a copy of a recent annual report and 10K of a publicly held company with stock actively traded on the New York, American or NASDAQ exchange. Answer the following questions:

1.   Analyze the company's financial health using ratio analysis and comparisons with competitors and other information ( i.e., you should perform an analytical review.) These rations may be extended with such market valuation ratios as PE ratio, market to book ratio, dividend yield and market capitalization (extended ratios may be found at Dunn& Broadstreet, www(dot)dnb(dot)com, and Hoovers, hooversonline.com). Models generating "extrinsic value" are available at www(dot)valuepro(dot)com, which also allows for sensitivity analyses.

_   _/15 a.       Is this a healthy company? (For example, you may find it useful to do an "Z score analysis" of

bankruptcy prediction, which is essentially a multivariate type of analysis - especially easy

with Excel; you might also see how it stacks up using a "strategic profit model" ; see also, Paquette and Skender, Journal of Accounting Education, 1996. In addition, in cases of suspected fraud, Joseph Wells "Irrational Ratios", Journal of Accounting, (Aug 2001) pp 80-83, provides useful guidance on alternative ratios.

_   _/5 b.   Which way is it moving?

_   _/5 c.    What are its sources of capital and what is the value of their capital?

_   _/5 d.   How has the capital market place responded to the company? (E.g., NYSE, Moody's)

_   _/5 e.    What is the quality of earnings (extraordinary/unusual events)?

_   _/5 f.   Who is the auditor? What has been the nature of the audit reports during recent years (i.e., what types of opinions have been issued)?

            _____/40

2.   How does their financial statement user community perceive the company? Try to obtain of a stock or bond analyst report or regulatory report.

            _____/10

3.  Specific considerations:

_   _/5 a.         What material types of transactions and transaction cycles are involved?

_   _/5 b.   What are the high-risk areas?

_   _/5 c.         What are the low-risk areas?

_   _/5 d.   Assess the interests of the company's management and audit committee to better "pitch" the audit proposal. Are there any integrity issues at play?

_   _/5 e.         To what extent do you believe it would be appropriate to select this client, in terms of its profits and the "client selection decision" discussed in the text?

_   _/5 f.         How will audit effort be allocated among geographical areas?

_   _/5 g.   Have you encountered anything in gathering your evidential material that suggests problems with external control, as it is so important in terms of Sarbanes-Oxley Section 404?

_   _/5 h.   Comment on your proposed use of internal audit (AU 322), outside specialists (AU 336) and specific areas of audit expertise (AU 311) needed to complete the audit.

_   _/5 i.         What form of auditors' report do you expect would be issued; what does it mean?

_   _/5 j.         What are the implications of SOX (Sarbanes-Oxley) especially section 404? IMPORTANT!

                _______/50

4.   Prepare an initial assessment for proposing on the audit of this company for use by the prospective engagement partner in your make-believe audit firm. If possible, construct a "client business risk matrix"; basically, this "matrix" is a 2x2 table arraying the "significance" of risks if there should be a problem in a particular area against whether a problem is "actually expected" in that particular area.