Detail Audit Analysis of

APPLE INC.
Introduction:
The introduction and brief analysis of the company Apple Inc will be depend upon the
followings.

Companys activities in brief.

PESTLE Analysis.
Risks and opportunities in companys activities.
Risks maps.
Conclusion.

Companys activities in brief

Apple is an American multinational company that designs and sells consumer electronics,
computer software and personal computers. The iPod, iPhones, iPads and the Machintosh line of
computers are best known hardware of the company.
PESTLE Analysis

Political

While Apple seems to display numerous products and conduct business on different segments, it
is legitimate to wonder what the Apple is good at. Too much diversity is exactly what can crush
Apple Inc. Apple produces many of its products and parts outside the US like Ireland, Czech
Republic, Korea and China. Political conflicts between the US and any of these countries may
have severe outcomes for Apple bad international incorporation relationships, wars and terrorism
might influence Apple severely.

Economical

The global economic depression might have immense impact on Apple Inc, as Apple have
handsome cash in reserves might either mean that the company doesnt know yet how to allocate
it or that may they have risk concerns about future. The US dollar has potential investment which
results in value lost. Apple had very little market share as compared to its main competitor
Microsoft which had created threat in terms of expensive apple products, due to which company
is facing risk of cannibalization and undercut by low cost deeply suffer imports.

Social

Another big social influence is the music industry. Apples image also portrays having developed
the modern individuals biggest virtual media stores, life styles combining iTunes these are well
ahead than any functionality with designs; Other competitors of this leading to brand direction.
Regarding identification and loyalty mostly people doesnt change their brand due to Apples
quality user interface, but due to media piracy ipod users illegally download music for free
instead of paying at iTunes. Apple is globally seen as a king of technology not due to usage but
due to quality and design.

Technology

There is a risk involve that Research and Development investment will not come through but if
planned research is conducted it could be an opportunity because Apple tends to invest in
Research and Development. New packing of products with enhanced technology must be
introduced because in I.T sector success come through products. Complex communications
should be minimized, user friendly devices will enhance the publicity.

Legal

There is a risk involves regarding reduced output and productivity due to outside US production
in different other countries, it could be related to factory premises or property disputes, another
risk is also associated as other brands may try to copy apple products e.g. recently few years
back Apple sued against Samsung.

Environment

In past there are no issues found regarding Apples product in affecting environment, but Apple
should try to use such technology which shouldnt have negative impact upon human health.
Environment friendly atmosphere supported companies usually has good repute in market, Apple
should try to be a part of such association.
Risk Map
Following risks are highly associated within similar industry

Due to political conflicts there could be too much diversity.

Bad international relationships.
Global economic impact depression.
Lost of currency value.
Cannibalization.
Low publicity which results in less or no publicity in worlds remote areas.
Too much expensive products creates opportunity for new entrants in market.

Conclusion
Apple Company has been affected by several internal and external factors, PESTLE analysis
help for identification of these factors. Such factors put Apple Inc in risky position as well as
gives opportunities to improve in certain areas.

AUDIT PLAN
An audit plan converts the audit strategy into a more detailed plan and includes the
nature, timing and extent of audit procedures to be performed by engagement team
members in order to obtain sufficient appropriate evidence to reduce audit risk to a low
level.
Audit Risk
The risk that the auditor expresses an inappropriate audit opinion when the financial
statements are materially misstated. Audit risk is function of the risk of material
misstatement and detection risk.
Planning Materiality
Misstatements, including omissions, are considered to be material if they, individually or
in the aggregate, could reasonably be expected to influence the economic decisions of
users taken on the basis of financial statements.
Qualitative Factors
Something that is important due to its size.
As a guide, something is big enough to be
Material if it is at least;
- 1% of revenue.
1-2% of total Assets; or
5-10% of PBT.

Detailed Financial Statement Analysis

Extracts of Statement of Financial Position and Income Statement.
As

In millions of USD

at As

at

2015-09-26

2014-09-27

Cash and Short term Investments

Total Accounts Receivable
Total Inventory
Other current Assets Total
Total Current Assets
Property Plant and Equipment
Goodwill
Intangible
Other long term Investments
Other long term Assets
Total Assets
Accounts Payable
Accrued Expenses
Other current Liabilities
Short term debts
Total current Liabilities
Total Long term Debts
Deferred Income tax
Other Liabilities
Total Liabilities
Total Equity
Total
Liabilities
&shareholders

41601
30343
2349
15085
89378
22471
5116
3893
164065
5556
290479
35490
24169
9952
10999
80610
53463
24062
12989
171124
119355

255077
27219
2111
14124
68531
20624
4616
4142
130162
3764
231839
30196
7689
19255
6308
63448
28987
20259
7598
120292
115547

Equity

290479

231839

Income Statement Extracts

52
In millions of USD

Revenue

weeks 52

weeks

ending

ending

2015-09-26

2014-09-27

233715

182795

Cost of Revenue
Gross Profit
Admin/General Exp
Research and Development
Total operating Expenses
Operating Income
Loss on sale of asset
Income before Tax
Income after Tax

140089
93626
14329
8067
162485
71230
903
72515
53394

Ratio calculations

2015

Gross Profit

40%

112258
70537
11993
6041
130292
52503
311
53483
39510

2014
38.5%

Operating profit

30.4%

28.7%

Return on Capital employed

42%

37%

Current Ratio
Quick Ratio

1.11 times
1.07 times

1.08 times
1.04 times

Receivable days

47 days

54 days

Payable days

92 days

98 days

Inventory days

6 days

6.8 days

Gearing

44.8%

25%

Profitability Ratios
The companys revenue has been increased by 21.78% which shows revenue is increasing while
cost of revenue has been increased by 19.8%, there is risk that may cost are understated.

The growth in gross profit shows that sales price of products has been increased or may be
purchase price of raw materials has been reduced.
Return on capital employed has been also increased which is due to increase in profitability
simultaneously the reserves of company are also increasing, which helps to increase the return on
capital employed. There is also risk involve regarding debts of company may be management is
hesitate to disclose all debts of company.
Liquidity Ratios
The companys cash position has been getting stronger moving towards the large amount of cash
balance, it shows the financial strength of the company.
The current and quick ratios are favorable which means that no provisions are recorded which
doesnt have any impact upon these ratios, may be due to which these are showing very much
favorable calculations.
Receivable days has been decreased but alternatively the receivable balance has been increased
which may be due to unrecoverable debts.
Payable days period has been reduced by 6 days which shows that payable will be getting relax
due to somehow reduce in payment days, this will enhance the good relationship among the
parties due to which company will be able to achieve stock on more discounted rates.
The inventory days are also reduced by 8 days period but it will affect the working capital cycle
in positive way as not to tie up cash flows by holding inventory.
The inventory balances may have been overstated as inventory should be recorded at lower of
cost or NRV.
Solvency Ratios
The companys gearing ratio has been increased dramatically from 25% to 44.8% this indicates
that high level of gearing could create difficulties in raising further finance in future in form of
loan.

The short term loan balance and payable balance also has been increased, it will be important to
obtain loan details from management and determine reasons for shoot up in gearing. This will
affect the going concern issues.
Finance charge
Finance charges has been omitted from the financial statements. It should be enquired why the
finance charge is not appearing in financial statements, when finance charge will be adjusted it
will reduce the profit figures may be due to which management is hiding.
Company has obtained loans it is compulsory there would be some finance agreement has been
decided the details of loan should be scrutinized.
There is also a risk that the dividend paid to shareholders has been incorrectly accounted for as a
distribution from retained earnings, the correct treatment would include the dividend with in
finance charge, in accordance with GAAP regarding financial instruments.
Provisions
Provisions are not available by the face name in the financial statements there is a risk that
provisions may be included in cost of revenue which would classified as operating expense.
The provisions must be recorded separately under its name in accordance with GAAP regarding
provisions.
Intangible Assets
The intangible assets are reduced in total amount, the complete details regarding intangible
should be obtained.
It must be investigated that whether they meet the criteria, or any asset has been sold or
purchased.
Property plant and Equipment
The balance of PPE is increased which shows that may be revaluation of PPE has been
conducted it should be verified whether revaluation was conducted according to GAAP and if

revaluations tends to increase the value of property its separate head should be maintained in the
Statements of financial positions.
Accrued Expenses
Accrued expense should be rechecked by obtaining the breakup of the total of the head, there are
chances that these expenses may be understated to reduce liabilities of the company.
Audit Opinion
After applying these above analytical procedures auditor will be able to make an opinion whether
the Financial statements are materially misstated or not.
If financial statements are found misstated the opinion would be qualified except for, otherwise
the comments would be the financial statements shows true and fair view.
If auditor found lack of evidence than his opinion would be disclaimer which means that due to
lack of evidence auditor was unable to make an opinion.
If auditor found material misstatement in financial statements than his opinion would be Adverse
which mean financial statements doesnt give true and fair view.