Form 10-K is an annual business disclosure report that must be filed
with the SEC by publicly traded companies. It contains everything
about the business that an investor wants to know before buying or
selling its stock or investing in the firm’s corporate bonds. The
company I chose to review was the Oracle Corporation.
What risks does the company identify that might lead to the risk of
overstating receivables/revenue?
• They do not continue to develop and release new or enhanced
products and services within the anticipated time frames.
• Infrastructure costs to deliver new or enhanced products and
services take longer or result in greater costs than anticipated.
• Their hardware revenues and profitability have declined and
could continue to decline.
• They may not receive significant revenues from current
research and development efforts for several years.
What risks does the company identify that might lead to the risk of
understating payables/liabilities?
• Late recording of cost of purchases
• International operations have been provided and are expected
to continue to provide a significant portion of our consolidated
revenues and expenses that Oracle Corporation report in U.S.
Dollars.
• There are changes in information technology trends that they
do not adequately anticipate or address with our product
development efforts.
The audit tests that can be performed
• Review cut-off procedures at period end to make sure there are
no subsequent period revenues recorded in the current fiscal
year.
• Auditors should review estimates for management bias.
• Create comparative summaries of all significant revenue
accounts, comparing the current year amounts with historical
data.
• Create summaries of average per customer income and
compare them with prior years
• Compute average profit margins by sales categories and
compare them with previous years.
Oracle Corp Annual Report 10-K (sec.report)
