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Literature review on internal control
Literature review on internal control
Auditing:generally accepted auditing practice
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Introduction:
We have been engaged to audit the financial statements for Exxon Mobil Corporation (ExxonMobil) and assess the effectiveness of their internal controls for the fiscal year ended December 31st, 2010 in compliance with the laws of the state of Texas and the standards set forth by the Public Company Accounting Oversight Board (PCAOB). In the previous memo sent, we outlined the client’s high inherent risk due to the account balances and transactions, foreign currency translations and the complexity of accounting for and auditing the client’s vast oil reserves and inventories. This memo will address preliminary assessment of control risk and the appropriate level of detection risk given the forgoing conclusions on inherent risk, audit risk and control risk.
Assessment of Control Risk:
The report on internal controls, according to ExxonMobil’s CEO, Treasurer and Controller, states they are solely “responsible for establishing and maintaining adequate internal control over (ExxonMobil’s) financial reporting.” They evaluated the effectiveness of internal controls over financial reporting based on COSO’s framework and concluded that controls were effective (MD&A, F-22). The report in internal controls acknowledged us—ExxonMobil’s independent public accounting firm PricewaterhouseCoopers LLP (PwC)—stating that the Corporation maintained effective internal control over financial reporting for 2009 and 2010 as it is the responsibility of management to maintain and assess its effectiveness. We, PwC, are responsible only to express an opinion on internal controls, which we opined in 2009 as unqualified (MD&A, F-22).
ExxonMobil has had nothing major in 2010 that could impair the low levels of control risk assessed by our a...
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...ear-end. In terms of extent, we can perform the audit without a substantially high number of samples while remaining effective at the same time.
For any questions or requests for additional information, please contact me at (202) 123-4567 or at Omar.Ali@PWC.com.
Works Cited
Exxon Mobil Corporation Amended Form 10-K/A. (22 Feb, 2011). Retrieved on 20 Nov, 2011 from EDGAR database
Exxon Mobil Corporation Financial Statements and Supplemental Information. (31 Dec, 2010). Retrieved on 17 Nov, 2011 from
Gambrel, Jon. “Nigerian Rebels Seize Seven Oil Workers”. Sydney Morning Herald. Retrieved on 21 Nov, 2011 from
The Clorox Company. (2014, February 4). The Clorox Company Reports Slight Sales Growth on Top of Strong Year-Ago Results; Updates Fiscal Year 2014 Outlook. Retrieved March 21, 2014, from http://investors.thecloroxcompany.com/releasedetail.cfm?ReleaseID=822888
Exxon Mobil is world’s largest publicly traded integrated oil company serving companies in more than 200 countries worldwide. Standard and Poor’s stock report for Exxon Mobil indicates that Exxon’s global functional organization and substantial diversification helps mitigate its exposure to business risk and margin volatility.
Form 10-K Chipotle Mexican Grill, Inc. (2011, February 17). Retrieved March 15, 2011, from U.S. Securities and Exchange Commission: http://www.sec.gov/archives/edgar/data/1058090/000119312511039010/d10k.htm#tx129308_27
Since the merge Exxon Mobil Corporation has grown to be a national giant and major player in the US economy. Their stock in the past six years has nearly doubled from $37.50 and the beginning of the merge. Their business is one that is on the leading edge of technology from there sky-scraper sized drilling platforms to there catalysts that help to produce thousands of consumer products. They produce high performing fuels and lubricants with zero emissions. Their downstream activities are refining and supply of petroleum products. Also Exxon Mobil’s chemical is a global marketer of ole fins, aromatics, fluids, synthetic rubber, polyethylene, polypropylene, oriented polypropylene packing films, plasticizers.
This report is to analyze the financial health of Chevron based upon several different measures including revenue, profit analysis, capital efficiency analysis, liquidity, financial leverage, market-based ratios, and finally the DuPont Analysis. Though a general observation can be made based on numbers/percentages alone, it is important to do a comparison with other companies in the oil and gas industry to get a better understanding of how we rank. In this report, I will use Exxon Mobil, Occidental Petroleum, and Conoco Philips as the peer group.
The Clorox Company. (2014, February 4). The Clorox Company Reports Slight Sales Growth on Top of Strong Year-Ago Results; Updates Fiscal Year 2014 Outlook. Retrieved March 21, 2014, from http://investors.thecloroxcompany.com/releasedetail.cfm?ReleaseID=822888
“Return on Equity.” Investopedia. Investopedia US, A Division of IAC., n.d. Web. 25 March 2014.
Williams, James L. "Crude Oil Futures Prices - NYMEX." WTRG Economics. 01 Apr. 2011. Web. 02 Apr. 2011. .
(7) Hinton, Sean. (2008, March). General Electric Company (GE). Wikinvest Retrieved March 3, 2008, from http://www.wikinvest.com/stock/General_Electric_Company_(GE)
Nossiter, Adam. “In Nigeria, a Deadly Group’s Rage Has Local Roots.” The New York Times.
Annual Report 2012 Costco Wholesale: Year Ended September 2, 2012 [PDF document]. 1-7. Retrieved from Costco Wholesale Financial Reports:
Saundry, Peter. "Exxon Valdez oil spill." Exxon Valdez oil spill. 9 June 2010. The Encyclopedia
Winston A, 2010, Five Lessons from the BP Oil Spill, Harvard Business Review, accessed 1 April 2014,
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
The measure of petroleum abundance and production in Nigeria is measured by the United States. According to the statistical data and the U.S. measures, Nigeria reserves make the country the tenth petroleum-richest nation, and by far, one of the most affluent countries in Africa. In the middle of 2001 its crude oil production was averaging around 2.2 million barrels per day. Though, there is a very prominent market for offshore rigs, nearly all of Nigeria’s primary reserves are in and around the delta of the Niger river. Ever since Nigeria became independent, it is one of the few oil producing countries that can increase its oil output drastically. The g...