CLIENT ACCEPTANCE AND RETENTION ANALYSIS
Amazon.com, Inc.
MIKE JONES
Liberty University, Dr. James Shelton
Author Note
Alberto Benavides, I have no known conflict of interest to disclose. Correspondence
concerning this article should be addressed to Alberto Benavides. Contract:
abenav07@liberty.edu
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
Company History
Jeff Bezos initially launched Amazon.com, Inc. as an online bookstore in 1994 from
Seattle, Washington. Bezos funded $10,000 to get things started and his wife at the time,
McKenzie, along with a small workforce operated Amazon from a garage his home in Bellevue,
Washington. In July 1995, Amazon officially opens for business and within a month, the retailer
was shipping books across America and internationally. Bezos’s slogan was “get big fast,” and
Seattle-based Amazon eventually mutated into an e-commerce player, selling everything from
groceries to furniture while helping alter shopping online. By the end of 1996, Amazon had over
$15 million in sales, while the company went public in 1997 and raised over 50 million dollars.
Initially, early investors in Amazon dreaded that it would not succeed because of slow growth,
but the company locked its first net profit during the last quarter of 2001.
Following Bezos’s initial strategy, it was transparent that the company needed to start to
sell more than books. In 1998, music and video sales started in Europe. Furthermore, in 1999,
the company began selling electronics, video games, software, home improvement items, toys
and games, etc. In 2000, the company began a service that allowed small businesses to sell their
products through the site and by 2006 it has started its Fulfillment by Amazon service that
managed the inventories of such businesses.
According to the Amazon website, “they aim to be Earth’s most customer centric
company. Our mission is to continually raise the bar of the customer experience by using the
internet and technology to help consumers find, discover and buy anything, and empower
businesses and content creators to maximize their success.” (Amazon, 2022) They provide
delivery services to a multitude of items, as well as streaming services through Prime video, Fire
and Echo devices, and Alexa voice recognition devices.
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
Acceptance/Non-Acceptance Statement
After evaluating the company’s background and financial statements, I recommend that
we accept Amazon as an audit client.
Independent Status of the Board
Amazon has twelve members serving on its board of directors. Jeff Bezos is the only
employee of Amazon therefore the other members of the Board of Directors would be considered
Independent Members by the SEC rules. Below is a consolidated list of the current members and
their full-time employers.
Jeffrey P. Bezos – Currently holds his position as the Executive Chairman of Amazon
(Amazon, 2022).
Andy Jassy – He is the President and CEO of Amazon.com, Inc and serves on the
Board of Directors (Amazon, 2022).
Indra K. Nooyi – In her previous roles, she has served as a director for PepsiCo, Inc and
as the Chairman of the board of Directors for Amazon.com, Inc (Amazon, 2022).
Jonathan J. Rubinstein – Previously, he was a Senior Vice President at Apple Inc, and
served as the General Manager in the iPod Division. He is currently the lead director of
Robinhood Markets (Amazon, 2022).
Thomas O. Ryder – He has been a director at Amazon since 2002 and was a Chair of the
Reader’s Digest Association, Inc and held the title as CEO (Amazon, 2022).
Patricia Q. Stonesifer – She has been a director since 1997. Previously, she was the
Senior Vice President of the Interactive Media Division and served as the Chairwomen
of the Gates Learning Foundation at Microsoft.
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
Ratio Analysis
Wendell P. Weeks – He has been a director since 2016 and has previously held a
variety
SEC 8-K filing
A Form 8-K is required to be filed with the SEC to inform shareholders of the major
events that are occurred within the company. The most recent report Form 8-K filing for Amazon
was on February 3, 2022, to inform shareholders of the results of operations and financial
condition from their final quarter in 2021. (SEC, 2022).
of financial, commercial, business development, and general management positions
across Corning (Amazon, 2022).
Audit Committee
The Audit Committee at Amazon consists of three individuals. These individuals include
Indra K. Nooyi, Chair of the Audit Committee, Wendell P. Weeks, Member of the Audit
Committee, and Keith B. Alexander, Member of the Audit Committee. Of these members, all of
them act independently as the oversight for the internal audit of Amazon. According to PCAOB
Rule 3526 – Communication with Audit Committees Concerning Independence states the
requirements necessary to provide audit committees with information to understand the
relationship between the auditor and their client. PCAOB Rule 3520 – Auditor Independence
states, “A registered public accounting firm and its associated persons must be independent of
the firm's audit client throughout the audit and professional engagement period (PCAOB,
2022).”
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
The ratios below are amounts for Amazon.com, Inc for the calendar year ending
December 31, 2021.
Current ratio = Current Assets / Current Liabilities = $161,580 / $142,266 = 1.14
Amazon’s current ratio is higher than Walmart’s by 0.21. We can assume that this
conveys Walmart has more financial resources to cover their short-term debt which
makes them more stable than Amazon. A good debt to equity ratio is anything below 1.0,
therefore the lower the number, the decrease in risk. Only Walmart falls below 1.0 in this
instance. A high gross profit signifies that a company has cash to pay for indirect costs. In
Debt to Equity = Debt / Equity = $116,395 / $138,245 = 0.84
Gross Profit = Gross Income / Net Revenue = $197,248 / $469,822 = 41.98%
Net Profit = Net Income / Net Revenue = $33,364 / $469,822 = 7.10%
Times-Interest-Earned Ratio = EBIT / Interest Expense = $39,964 / $1,809 = 22.09%
Source: (Stock Analysis.com, 2022)
Comparison Based on Ratios
The ratios below are for Walmart and the amounts are for fiscal year ending December
31, 2020.
Current ratio = Current Assets / Current Liabilities = $90,067 / $92,645 = 0.97
Debt to Equity = Debt / Equity = $45,041 / $87,531 = 0.55
Gross Profit = Gross Income / Net Revenue = $138,836 / $559,151 = 24.83%
Net Profit = Net Income / Net Revenue = $13,510 / 559,151 = 2.42%
Times-Interest-Earned Ratio = EBIT / Interest Expenses = $22,548 / $2,315 = 9.73%
Source: (Stock Analysis, 2022)
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
comparison between Amazon’s and Walmart, Amazon has a higher ratio in this aspect.
If a company’s interest earned ratio is greater than 2.5 then it is not considered a high-
risk for default. Both companies are at a good standing based on the ratios provided in
the data above.
Audit Risk
There are a few factors that go into exploring risk of Amazon.com, Inc. An audit
concern could be the expansion of products, services, and technology. As the company continues
to evolve, there will be additional business, financial, and competitive risks that they will accede
to. Although expansion could bring some risk, Amazon keeps up with consumer demand and
behavior that make remain strong above their competitors. More importantly, during COVID-
19 pandemic, Amazon showed initiatives that other companies failed to propose. After looking
at the strong financial history and financials of the company, I would gladly accept Amazon as
an audit client.
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
References
A Brief History of Amazon - Podean - Global Amazon and Marketplace Marketing Agency.
Podean. (2020, May 29). Retrieved December 7, 2021, from
https://www.podean.com/a- brief-history-of-amazon/.
Amazon (2022) Retrieved on February 28, 2022 from www.amazon.com
Amazon Financial Ratios for Analysis 2005-2022: AMZN. Stock Analysis. (2022). Retrieved on
February 28, 2022, from https://stockanalysis.com/stocks/amzn/financials/
Officers and Directors. Amazon. (2022). Retrieved on February 28, 2022
from https://ir.aboutamazon.com/officers-and-directors/default.aspx.
PCAOB (2022) Section 3. Auditing and Related Professional Practice
Standards. Retrieved on February 28, 2022, from
https://pcaobus.org/about/rules-rulemaking/rules/section_3.
SEC Filings. Amazon.com, Inc. - SEC filings. (2022). Retrieved February
28, 2022, from https://www.sec.gov/ix?
doc=/Archives/edgar/data/0001018724/000101872422000002/amzn-
20220203.htm
CLIENT ACCEPTANCE AND RETENTION ANALYSIS
Walmart Financial Ratios for Analysis 2005-2022: WMT. Stock Analysis. (2022).
Retrieved: February 28, 2022, from
https://stockanalysis.com/stocks/wmt/financials/
