10-K: Amazon Com Inc 2021 Annual Report 10-K (sec.report)
In their 10-K form for 2021, Amazon identified potential risks that would
affect the company’s projection of future financial condition and operations.
These include but are not limited to: fluctuation in foreign exchange rates,
changes in global economic condition and customer spending, outcome of
legal proceedings and claims, and payment risks. A fluctuation in the exchange
rate may depreciate the value of money, resulting in the company having to
overstate its revenue acquired internationally to account for the differences.
The effect of global economic conditions and customer spending as well as
payment risks may result in a company overstating or understating its revenue
and/or expenses. If customer spending decreases, the projected revenue for a
company also decreases as they are unable to acquire the amount of funds they
predicted. Hence, companies may feel the need to overstate in order to account
for this change. In addition, if companies are unable to collect their receivables
in a timely manner, they may understate their liabilities with hopes of
increasing assets and owner’s equity in their financial statements. The
company could also overstate their accounts receivable account so that it may
appear as if they are collecting debts according to the company’s policies.
Substantive and risk assessment test to detect material fraud or monetary
misstatements and understanding the company’s internal control relative to the
environment in which they operate. It is the auditor’s responsibility to ensure
that financial statements are accurate, no understatements or overstatements.
Auditors could test the issuance of bank confirmation to confirm end cash
balances. Analyzing the market in which the company operates to understand
how it is performing relative to its competitors. This includes conducting
research and collecting surveys to determine how consumers preference has
changed and how the company can appeal to consumers growing and
unlimited needs.
