Intern project Flashcards
• Out of over 3000 clients, the Phoenix office only has about 25 that are publicly traded companies, however they are contributing about 10% of revenue
• Here is an overview of the services we are providing for public companies. As you can see, we mostly do audit work for them; we audit a lot of employee benefit plans which we don’t typically do tax work for
• Most of the audit work Phoenix office does for publicly traded companies is on Employee benefit plan audits, rather than integrated corporate audits for both financial statements and internal controls. (Next slide)
• The pros of Employee benefit plan audits are that they are low-risk, there’s fewer tests (substantive procedures) that need to be performed since the scope is limited (11K requires full scope procedures).
Also, EBP plans are audited once a year for a few weeks at most whereas a corporate integrated audit requires quarterly filings (10-Q) in addition to the 10-K (for which we generally perform review procedures).
Cons of Employee benefit plan audits are that they do not produce enough revenues individually
• Conversely, corporate integrated audits generate higher revenues, but they are higher-risk of being misstated, and are more expensive because they require more testing, and internal controls must be audited as well as financial statements. Phoenix office does not have the resources to do a lot of them.
• We can take on more EBP audits for public companies and we can target public companies even if they are already being audited by one of the big four firms. We have a competitive advantage because our fees are lower.
• We thought it would be best to focus mainly on finding more clients to provide Employee Benefit Plan services for, but also possibly take on one more corporate integrated audit for a publicly traded company, because the revenue we would receive would be much higher than for an EBP audit. The Phoenix office already has the staff in place to do one corporate audit, so they could use the resources they have for another
• Right now, the only public client for which the Phoenix office performs a corporate integrated audit is Amtech Systems. MHM has been their auditor since 2005. They manufacture high tech machinery, and they operate in the United States, Asia, and Europe.
In addition to the regular costs of adhering to PCAOB standards, some other factors that are making Amtech more costly to audit are first of all that they are selling very complex, technical machinery with a lot of components added to their finished product, which adds costs to audit. Also, since they are operating in three different countries, travelling to each location is another expense
• Our recommendation is that we mainly focus on expanding our client base for more employee benefit plan audits with public companies, but also try to find one more public company for corporate audit. A good company to target is one that is headquartered in Arizona, is only located in the United States, does not have a vast number of locations in other states, and is selling simple, finished products that don’t have a lot of components to audit
