Wk 7 Walmart Audit (COMPLETE PACKAGE)

Auditing is an important aspect of the company. It gives the stakeholders, more so the investors an assurance that the financial reporting of the company gives true, transparent and fair view of the company financial state. It also ensures that the company is complying with all the set statutory provisions and regulations which guides its operations. The need for auditing arises from the agency problem relationship between the management of the company and the investors. The management may work in their best interest rather than that of the company, including manipulating the financial reports to suit their interest. This calls the investor to seek the services of an independent auditor to check the accuracy of the financial reports of the company prepared by the management.

This audit report analysis the information and recommendations based on the audit findings of Walmart. This involves the recommendation concerning the company’s corporate governance, segregation of duties and working relationship of internal auditor and external auditor. The recommendations are based on the Three E’s of an operation audit – efficiency, effectiveness and economy. The discussion involves the corporate culture of Walmart, Expenses to Revenue, The Accounting department (internal and external audit), senior management and the audit independence

Based on the interviews and interactions with the employees of Walmart, its corporate culture is the driving force of its success. The management and the employees beliefs that culture is the foundation of everything in Walmart. The company’s culture is therefore, reflected in its appetite for risk. The risk of the firm can be seen from its capital budgeting and its expansion plans. The risk appetite of Walmart is seen from its massive investment in acquisition of major outlets in other countries, for instance the recent acquisition of Massmart Supermarket in South Africa, Lameez Omarjee, 2017. The company also runs an e-commerce platform which has seen it reach many of its clients globally, where they do not have physical store. It delivers their merchandise products to the customers doorstep, hence making it convenient for customers to shop. The audit plan for culture indicates that culture is a control as it contributes significantly in the performance of the company’s performance. The aggressive growth target has resulted in improved revenue generation and quality services to its customers globally. From the company’s annual report and the articles available online, it is clear that the corporate culture is healthy as it has contributed immensely to the improved performance and growth of the company.

I therefore, recommend that Walmart should upheld its corporate culture and ensure that its employees are properly incorporated into it. The culture has values and beliefs which acts as a guide to the employees in the performance of their duties. The Walmart corporate culture has been the cornerstone of its success. Its risk appetite is also paying well. The company should further expand to the other developing countries and increase its e-commerce function of the business to reach many customers and improved its performance as well as create a good global brand. According to the Walmart President, the company is not pleased with the sales from its Walmart US last year, and the management team is implementing an aggressive plan to reinforce its merchandise assortment and presentation a broad to more relevant customers, making it the most positioned global retailer. This will involve a higher risk but an increase in returns to the company.

The expense to revenue of the company is an essential financial audit that must be carried out by the external audit staff. This involves the examination of the firm’s revenue against the expenses in a given period. The expense revenue ratio helps in analysing the profitability of the company for a given period of time. When performing the audit procedure, the auditor needs to ascertained that the actual costs and the revenue to the company are properly documented and recorded in their relevant accounts. The management of the Walmart has tried to maintain a lower expense to revenue ratio to ensure that the company obtains a high return from its investment. The expense to revenue growth over years indicates an improvement in the company’s profitability and hence investors are getting more returns from their investment. According to the Walmart annual report 2011, the annual net income increased from $14,370 million in 2010 to $16,389 in 2011, an indication of growth in income. The company should further engage in a massive expansion to increase sales and look for ways to improve efficiency in their operations, hence reducing the operational expenses and more returns will be generated by the company.

The competitor and industry analysis trend analysis are factors of operational audit and is performed to compare the performance of Walmart with its peer competitors. According to Morningstar (2017), Walmart is a head of its competitors in terms of capitation and the total sales revenue, an indication of the above industry average performance. The increased global presence of Walmart should enhance to generate more revenue and increase its competitiveness. Some of the ratios used to measure Walmart performance in comparison with its competitors are solvency, turnover, profitability and the leverage ratios.

The accounting department of Walmart is a very critical part for the organization. All the transactions taking place in the organization are recorded in various ledgers and posted to the financial statement of the company. The accounts department are split into three components: accounts, internal audit and external audit. There is segregation of duties among this three distinct components of accounting. The segregation of duties ensures that there is clear defined responsibility of each and ensures good internal control is in place. The Walmart has an internal audit committee in charge of formulating accounting policies and checking the works of the accountants to ensure that transactions are properly recorded and all the company’s resources are accounted for. The external audit checks the financial statements of the company to ensure there are prepared in accordance with laid down procedures and in accordance with international accounting standards. The functions are properly segregated by the company and each function perform distinct duties, hence ensuring accountability. The company should further strengthen

The senior managers are tasked with ensuring that the strategic plans of the company are executed. The competence of the senior managers is an operational audit opportunity as it ensures it checks the efficiency of the senior managers in implementing the company’s strategic plans. The segregation of senior management duties is also an operational audit opportunity. The segregation of duties ensures that each senior manager is responsible for executing of the assigned duties. The senior managers coordinate with each other in order to ensure that they achieve the common objective of the company. The senior management should meet regularly to evaluate their performance and check on the areas for improvement.

The internal audit of the organization should be independence to ensure that there is no compromise in auditing other departments. The independence of auditors ensures that the proper internal control is in place and keeps all the respective employees accountable for their actions in performance of the assigned duties, Arya, A., & Glover, J. (2014). The internal audit department should be strengthened. The external auditor works independent from internal auditor in execution of his/her duties. However, where necessary, the external auditor may use seek some information from internal auditor to support him in preparation of the audit report.

Arya, A., & Glover, J. (2014). Auditor independence revisited. Journal of accounting, auditing & finance, 29(2), 188-198.