Based on the background research and analytical procedures performed in Stages a-c, summarize your observations about the company’s business, including your assessment of the client’s business risk. Prepare a broad audit plan: · Which transaction cycles are the high-risk areas? · Identify at least three risk areas in the audit of this company and describe: (1) the risk; (2) why you have assessed this as a specific risk; and (3) how you would perform the audit to address this risk. · If management faced tremendous pressure regarding the entity’s financial performance, what opportunities might exist for them to engage in fraudulent financial reporting? Above is what you need to write the group paper about. Only three pages by analyzing my teammates’ parts to answer those questions!!!!!! Below is my teammate’s part: SECTION 1 (a-c) The company HP, short for Hewlett-Packard, is a company that sells hardware, software, and other services pertaining to technology. HP is a multinational information technology (IT) company. This company has adopted the values called the HP Way, which are “designed to foster innovation, respect for individuals and value for customers.” HP being a leading company in technology offers, HP products includes PCs, computing devices, enterprises and industry standard servers, storage devices, networking products, software, printers, scanners, plotters and other imaging products. The company introduced handheld calculators, the first commercially distributed data processing system, Laser Jet printers, and (jointly with Intel) the Eplicitly Parallel Instruction Computing (EPIC) architecture. HP’s customers based on the variety of hardware components as well as software and related services to consumers, are small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. Section 2 (a-c) The key characteristics in the consumer electronics business is the drive for innovation, competitiveness, and creativity. The tech industry is very fast paced, and companies need to keep up with the newest devices, and demand. HP offers a diverse product offering, and has the largest market share in printers (Swot analysis of HP). In 2015, after HP split into HPQ and HPE to cut costs, it flowed into the “shake out” phase of the life cycle by the end up 2016. During 2017/2018 sales seemed to climb back up slightly putting them in the “reinvention” phase under “maturity” in the life cycle. HP has managed to extend its life cycle with increasing sales, and income. There are many important factors for success in this business industry. An important one to highlight is offering a product or service that is simple enough to understand for those that aren't expert computer users (10 tips for). Customers need to be able to purchase your product, and understand how to use and access it with very minimal trouble. In order to stand out from competitors, you must be visible to.

1. Based on the background research and analytical procedures
performed in Stages a-c, summarize your observations about the
company’s business, including your assessment of the client’s
business risk. Prepare a broad audit plan:
· Which transaction cycles are the high-risk areas?
· Identify at least three risk areas in the audit of this company
and describe: (1) the risk; (2) why you have assessed this as a
specific risk; and (3) how you would perform the audit to
address this risk.
· If management faced tremendous pressure regarding the
entity’s financial performance, what opportunities might exist
for them to engage in fraudulent financial reporting?
Above is what you need to write the group paper about. Only
three pages by analyzing my teammates’ parts to answer those
questions!!!!!!
Below is my teammate’s part:
SECTION 1 (a-c)
The company HP, short for Hewlett-Packard, is a company that
sells hardware, software, and other services pertaining to
technology. HP is a multinational information technology (IT)
company. This company has adopted the values called the HP
Way, which are “designed to foster innovation, respect for
individuals and value for customers.”
HP being a leading company in technology offers, HP products
includes PCs, computing devices, enterprises and industry
standard servers, storage devices, networking products,
software, printers, scanners, plotters and other imaging
products. The company introduced handheld calculators, the
first commercially distributed data processing system, Laser Jet
printers, and (jointly with Intel) the Eplicitly Parallel
Instruction Computing (EPIC) architecture.

2. HP’s customers based on the variety of hardware components as
well as software and related services to consumers, are small-
and medium-sized businesses (SMBs) and large enterprises,
including customers in the government, health and education
sectors.
Section 2 (a-c)
The key characteristics in the consumer electronics business is
the drive for innovation, competitiveness, and creativity. The
tech industry is very fast paced, and companies need to keep up
with the newest devices, and demand. HP offers a diverse
product offering, and has the largest market share in printers
(Swot analysis of HP). In 2015, after HP split into HPQ and
HPE to cut costs, it flowed into the “shake out” phase of the life
cycle by the end up 2016. During 2017/2018 sales seemed to
climb back up slightly putting them in the “reinvention” phase
under “maturity” in the life cycle. HP has managed to extend its
life cycle with increasing sales, and income.
There are many important factors for success in this business
industry. An important one to highlight is offering a product or
service that is simple enough to understand for those that aren't
expert computer users (10 tips for). Customers need to be able
to purchase your product, and understand how to use and access
it with very minimal trouble. In order to stand out from
competitors, you must be visible to the customers. “Be
accessible on social media, write a blog or articles for industry
publications, and participate in conference panels and speaking
engagements” (The 7 Critical). Market your product so that
people from all over the nation know it exists. Having
outstanding customer service will attract customers, and help
keep them loyal as well. The customer experience is just as
important as the product/service being offered. People tend to
be very loyal to brands, so give them a reason to stick around.
HP’s competitor, Apple does a better job at excelling in this
area but “HP ranks 50th amongst the top 100 brands around the

3. world.” (SWOT analysis). One of the toughest key factors to
keep up with is being able to continually provide up to date
products/services. This innovation and creativity is essential to
all companies in the computer industry. “ HP Labs research is
focused on key growth areas that include advancing
technologies like sensing, natural language detection,
audio/video analytics, and new information displays” (SWOT
analysis). You must be able to grow along with the rest of the
world and its changing technology.
As with all companies and businesses HP has its own
regulations and legal matters of concern. HP states, “Section
255 of the Telecommunications Act requires
telecommunications products and services to be accessible to
people with disabilities. FCC rules cover all hardware and
software telephone network equipment and telecommunications
equipment used in the home or office. Such equipment includes
telephones, wireless handsets, fax machines, answering
machines and pagers. FCC rules also cover basic and special
telecommunications services, including regular telephone calls,
call waiting, speed dialing, call forwarding, computer-provided
directory assistance, call monitoring, caller identification, call
tracing and repeat dialing, as well as voice mail and interactive
voice response systems that provide callers with menus of
choices.The CVAA updates federal communications law to
increase the access of persons with disabilities to modern
communications, updating accessibility laws enacted in the
1980s and 1990s to include new digital, broadband, and mobile
innovations. Regulations are enforced by the FCC and
documented as 47 CFR Part 14 and Part 79.” (accessibility
legislation). HP has its own social and environmental
responsibility report on its website, publicly displayed. In this
report you may find details about HP’s dedication to its
workplace and community, conserving our environment,helping
to create a sustainable future. HP holds the values of its
employees and community just as important as the products and
services it offers. The company promotes a diverse workforce,

4. and has an open door policy that is encouraged, especially in
cases of harassment of any kind. “Our goal is to provide
innovative information-technology solutions to foster growth in
technologically underserved communities in ways that are
economically, environmentally, and culturally sustainable”
(HP). HP is continuously working towards a healthier
environment, but still has a long ways to go. “Our
environmental goals are to provide products and services that
are environmentally sound throughout their life-cycles and to
conduct our operations worldwide in an environmentally
responsible manner. To achieve these goals, the company has
established the following Environmental Policy. All HP
managers and employees are expected to support
implementation of this policy in accordance with their roles and
responsibilities in the organization. ” (HP). The company
recognizes that there will always be something to work towards
and achieve, especially with the sustainability of our
environment. HP has been working towards better innovations
to help others worldwide as well. “The Joko Project, named for
the Wolof word for “link,” was born of a partnership among HP,
a local telecommunications provider, and world-renowned
musician Youssou N’Dour. This effort will connect Senegal
with the world by providing affordable Internet access across
the country and in expatriate communities worldwide.” (HP). It
is the many projects and partnerships like this that help make a
difference for the lives of millions worldwide.
Section3
Part 3
Account Balance
2015
2016
2017
% change 2015-2016
% change 2016-2017

5. Net Sales
51,463
48,238
52,056
-6.69
7.33
Cost of Sales
41,524
39,240
42,478
-5.82
7.62
Operating Expenses
4,719
3,833
4,376
-23.12
12.41
Operating Income
3,920
3,549
3,519
-10.45
-0.85
Net Account Receivables
8,639
7,382
7,895
-17.03
6.50
Inventories
4,288
4,484
8,786
4.37
48.96

6. Accounts Payable
10,194
11,103
13,279
8.19
16.39
Long-Term Debt
6,677
6,735
6,747
0.86
0.18
Net sales do not account for the cost of goods sold, or operating
expenses. Analysts review this amount on the income statement
when assessing the health of a company.
Cost of Sales is the direct costs of the production of the goods
sold in a company. This amount includes the cost of the
materials used in creating the good along with the direct labor
costs used to produce the good but excludes operating expenses.
An operating expense is the expenses a business incurs through
its normal business operations which include rent, equipment,
marketing, payroll, insurance, etc. One of the responsibilities
that management must contend with is determining how to
reduce operating expenses without significantly affecting a
firm's ability to compete with its competitors.
Operating income measures the amount of profit realized from a
business's operations, after deducting operating expenses and
cost of goods sold (COGS).
Net receivables is the total money owed to a company by its
customers minus the money owed that will likely never be paid.
Inventory is the term for the goods available for sale and raw
materials used to produce goods available for sale. Inventory
represents one of the most important assets of a business
because the turnover of inventory represents one of the primary
sources of revenue generation and subsequent earnings for the

7. company's shareholders.
Accounts payable (AP) represents a company's obligation to pay
off a short-term debt to its creditors or suppliers.
Long-term debt consists of loans and financial obligations
lasting over one year. Long-term debt for a company would
include any financing or leasing obligations that are to come
due after a 12-month period.
The comparative income statement above shows there was an
increase in the net sales of 7.33% over the reported period to
$52,056. The cost of goods and services totaled $42,478 in
2017, 7.62% more than in 2016. The operating expenses
increased by 12.41% totaling $4,376 but the operating income
decreased by 0.85% to $3,519. The inventories increased by
48.96% to $8,786. The net accounts receivable, accounts
payable and long-term debt all increased by 6.5% ($7,895),
16.39% ($13,279) and 0.18% (6,747), respectively. Earnings
Before Interest and Taxes was positive at $3,276 in 2017 but
decreased by 14.8% during 2016-2017. On the whole, 2017 was
a good period as the company recorded $2,526 million net
earnings from continuing operations
Activity
2015
2016
2017
Account Receivable Turnover
5.54
11.02
12.51
Number of Days Sales in Account Receivable
35
30
29
Inventory Turnover
7.76
8.95

8. 6.40
Number of Days Sales in Inventory
39
39
46
Liquidity
2015
2016
2017
Current Ratio
1.23
0.98
1.00
Quick (acid Test)
1.13
0.74
0.74
Cash Ratio
0.61
0.56
0.49
Long-Term Debt Obligations
2015
2016
2017
Times Interest Earned
6.64
11.83

9. 10.17
Debt Ratio
73.7%
113.4%
11.0%
Debt to Equity
0.24
-1.73
-1.98
Profitability
2015
2016
2017
Gross Margin
21.5%
18.7%
18.4%
Operating Margin
6.21%
7.36%
6.76%
Return on Assets
4.38%
9.31%
8.30%
Return on Equity
16.61%
-57.02%
-63.04%
The 2017 accounts receivable turnover of 12.51 indicates HPQ
collected its average receivables 12.51 times that period. The

10. higher the turnover is, the faster the collection process. As a
result, the average collection period dropped from 30 days to 29
days. This means that it took an average of 29 days to collect a
receivable in 2017.
HPQ’s inventory was less active in 2017 than in 2016. The
company was holding the inventory almost a 2.54 times or 7
days longer in 2017 than in 2016. This means that it took an
average of 46 days to sell inventory in 2017.
Current Ratio indicates of a firm’s ability to pay its current
liabilities from its current assets. HPQ’s current ratio was 1.00
in 2017, meaning that HPQ had 1.00 times as many current
assets as current liabilities. The current ratio was 0.98 at the
end of 2016 and 1.23 at the end of 2015. A ratio under 1
indicates that the company’s debts that will need to be paid in a
year or less are greater than its assets.
Quick Ratio (Acid Test Ratio) indicates a firm’s short-term
liquidity measuring how well company can meet its short-term
obligations with its highly liquid assets, such as cash and
equivalents, marketable securities and receivables. The quick
ratio for 2017 and 2016 was 0.74, showing there were $0.74 of
the quick assets for every $1.00 of the current liabilities. The
ratio for 2015 shows $1.13 of the quick assets were available
for every $1.00 of the current liabilities.
Cash Ratio estimates the share of the company's current
liabilities that can be paid off immediately. A lower value
indicate possible problems with covering company's current
liabilities immediately but higher value can speculate company's
inefficient asset structure. The cash ratio shows that the
company was able to pay off 49% of its debt immediately as for
the end of 2017 which is a 7% decrease from 2016 (0.56).
The times interest earned ratio indicates a firm’s long-term debt
paying ability. Having normal times interest earned ratio means
lesser risk for a firm not to meet its interest obligation. If this
ratio is being relatively high and stable over the years, a
company is financially sustainable, while relatively low and
fluctuating ratio would mean potential problems with paying the

11. long-term obligations. The times interest earned ratio of 10.17
shows HPQ had no difficulty generating enough cash flow to
pay interest on its debt at the end of 2017. Company's ability to
pay interest on debt was better in 2016 (11.83) than in 2015
(6.64).
The debt ratio is an indicator of firm’s long-term debt-paying
ability. It is a ratio of firm’s total liabilities to its total assets. It
shows how well creditors are protected in case of company’s
insolvency by indicating the percentage of firm’s assets
financed by creditors. In terms of financial sustainability of a
business lower ratios are more favorable. The debt ratio for
HPQ tells us that in 2017 each $1.00 of the assets was financed
by $0.11 of debt or 11%. In 2016 it was 113.4% of the assets
were financed by debt and in 2015 it was 73.7%
Another ratio, Debt to Equity, helps analysts understand how
well creditors are protected in case of firm’s insolvency. It’s a
ratio that compares the total debt with the total shareholders’
equity. If a company’s debt to equity ratio is high, it has been
financing its growth with debt. This is done to generate more
earnings than it would have been without outside financing. In
terms of long-term debt-paying ability the lower this ratio is the
better. The debt/equity ratio for HPQ was -1.98 in 2017, -1.73
in 2016 and 0.24 in 2015.
The gross margin was positive in 2015-2017. At the end of 2017
per dollar of sales collected HPQ kept $0.18 as profit. In 2016,
the gross margin was 0.187 (18.7%) and 0.215 (21.5%) in 2015.
The HPQ’s operating performance was good in 2017. For every
dollar of the net sales the company earned $0.07 in operating
income. In 2016, it earned $0.07 and in 2015 it earned $0.06.
For HPQ the return on assets shows that the company, in 2017,
earned a profit of about 8.30 percent per dollar of the assets. In
2016 it earned 9.31% and in 2015 it earned 4.38%.
Return on Equity (ROE) looks at the firm’s bottom line to gauge
overall profitability for the firm’s owners and investors.
Stockholders are at the bottom of the pecking order of a firm’s
capital structure, and the income returned to them is a useful

12. measure that represents excess profits that remain after paying
mandatory obligations and reinvesting in the business. HPQ’s
ROE for 2017 was -63.04%, -57.02 in 2016 and 16.61% in 2015.
Industry Comparison
HP
IBM
Dell
Apple
Market Cap
35.97
109.08
80.29
856.41
Revenue
52.056
79.139
61.642
229.234
Employees
49,000
366,600
101,800
132,000
Revenue Growth
7.91%
0.98%
21.08%
6.30%
Gross Margin
18.40%
45.78%
21.02%
38.47%
Net Income
2.526

13. 5.753
-1.672
48.351
EPS
1.48
6.14
-2.79
9.21
Different industry variables create the unique financial
conditions, in which the company is currently working. This is
why a comparison with the major competitors helps to get a
precise estimation of the HPQ’s financial position and
effectiveness.
Market capitalization refers to the total dollar market value of a
company's outstanding shares. Analysts use this figure to
determine a company's size, as opposed to using sales or total
asset figures. HPQ is the smallest when compared with its
competitors with a Market Cap of $35.97. Revenue is the
amount of money that a company actually receives during a
specific period, including discounts and deductions for returned
merchandise. It is the top line or gross income figure from
which costs are subtracted to determine net income. HPQ’s
revenue is the lowest of its competitors at $52.056 billion. HPQ
has the least amount of employees (49,000) of its competitors as
well and its gross margin is also the smallest at 18.4%. HPQ’s
Net income of $2.526 billion is less than IBM and Apple but it’s
better than Dell. HPQ’s Earnings per share, like its Net Income,
is less than IBM and Apple but greater than Dell.
.
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following the instructions!!!