Verizon Case Summary

Improved Essays
Assessment of detection risk by performing substantive analytics related to consolidation policy and substantive procedures related to management assertions, and brainstorm of potential fraud and extended procedures.

Substantive analytical procedures related to consolidation policy

Based on the preliminary analytical procedures about ratios and account balances, I found some risk areas and great changes from 2013 to 2014 in financial statements such as the net income, investments in unconsolidated businesses, cash and cash equivalents, contributed capital, and non-controlling interests. After the review of the 10-k form, I found that the consideration paid for acquisition of Verizon Wireless was primarily comprised of cash and Verizon common
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• Compare these to sales to outside parties to identify unusual sales and not arm’s length sales.

 Recommended substantive analytical procedures to test non-controlling interests with existence and completeness assertion:

• Compare revenues in subsidiaries with records in income statement to confirm the existence of revenue attributable to non-controlling interests.

• Compare the ratio of cost to revenue in current year to prior year to identify significant increase in cost and revenue especially looking for difference attributable to the acquisition of non-controlling interests to test completeness.

Substantive procedures to test management assertions

Based on the review of the annual report, the analysis of 10-k form, and the analytical procedures, I have concluded some substantive procedures about investments in unconsolidated businesses, non-controlling interests, related parties, and common stock with related valuation, existence and completeness, existence, and valuation assertion, respectively.

Assertion Test of controls Substantive
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 Recommended extended procedures to detect not arm length transactions:

• We can compare the sales price between related parties with the sales price to outside consumers to find out not arm length transactions

 Recommended extended procedures to detect the fraud of inflating capital:

• We need to execute management inquiry to obtain the objectives of investing each other to detect the fraud of inflating capital.

 Recommended extended procedures to detect the fraud of inflating profit through transactions of inventory:

• We can inspect inventory account and have physical inventory observation to see if there are some inventories that have been placed in the warehouse for a long time with no reasons.

After the brainstorm about potential fraud and performing extended procedures, we can detect and mitigate potential fraud to reduce detection

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