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Risk Analysis Memo

Names

Institution
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Risk Analysis Memo

To: The Auditors

From: The Senior Auditor

Date: March 28, 2017

Subject: Risk Analysis of Match.com

In this memo, I will fist introduce the overall strategy of the Match Group and then indicate one

most critical strategy risk and a business process to reduce it. Then, I will briefly describe the

objective of the business process based on the overall strategy and state one process risk that

threat to achieving this goal. Additionally, I will ascertain and appraise two internal controls that

report the process threat. At the end of the memo, I will ascertain one financial report account

and debate the risk misstatement constructed on five assertions and give the audit measures for

each assertion.

Match Group’s strategy is to make available a widespread consumer preference through offering

dating products that mutually appeal to the widest range of customers to take full advantage of

the ability to capture other users (Street & Park, 2017). The most fundamental objective of every

company is to increase its market share and thus make profits in return. In regard, Match.com is

not an exception as it requires long-term plans that will sustain the company given that many

competitors are providing similar dating services in the industry (Chepkwony, 2017.

Nonetheless, rapid changes of customers’ needs may lead to loss of opportunities in the market

hence reducing growth and profitability of the company. To ensure this strategic risk is

mitigated, Match.com should substantially invest in sales and marketing to facilitate effective

sales and marketing of the dating services. Therefore, Match.com should spend more time on
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appealing to many more customers to buy dating services through advertisement channels such

as mobile and online video platforms (Saracco & Ruzalski, 2017). However, Match.com has

devolved more funds so as to make sure that both offline and online dating users are maintained.

Additionally, sales and marketing facilitate the achievement of this overall objective of

Match.com by offering an innovation of the dating services that will help in determining

customers’ preference hence providing advice to the company to put more resource in the

development of such dating services (Peecher, 2017).

Match.com deals mutually with online and offline dating facilities through virtual networks.

These channels are still undergoing development hence they have not yet been approved thus it

gives no assurance that the channel that is used to providing these services (Peecher, 2017).

Internal controls at Match that address this process risk and whether they have been effectively

designed

Access controls: Match.com should ensure that proper admission to dissimilar parts of the

system is monitored via passwords, lockouts, and electronic access logs in order to keep

unapproved users out of the systems while creating a way to audit the procedure of the method to

ascertain the sources of the divergences (Bentley-Goode, Newton & Thompson, 2017).

However, according to me, access control have been designed effectively since it does not permit

any authorize person to access the system without the awareness of the Match.com.

Approval controls: Match.com should also ensure that specific managers permit confident

varieties of operation by generating a layer of obligation to accounting registers to make

available that transactions have been evaluated and accepted by the appropriate experts (Vrijens

& Urquhart, 2014). This will prevent many dishonest people from creating large fake

transactions with the corporation resources.

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To ascertained true and fair view of the financial statement, it is necessary to check and confirm

the effectiveness of the internal control system on how it function thus establishing the best way

to test for the errors and frauds. An auditor will have to select some of the accounts randomly in

the financial statement and used them to measure whether internal control is strong or weak since

in some cases assertions made by the management may not be correct.

Account payable: It shows the responsibilities to creditors for purchases of the stock and

materials on credit. Procurements that relates to the accounts payable may be stated at the gross

method. To adequately test for account payable, assertions on the acquisitions and cost of goods

traded must be taken into deliberation.

Completeness: An internal auditor should make should that carry out an understanding on the

account payable ledger with control account, Purchases deadlines tests to determine whether if

properties for which title has passed or not passed are properly accounted for. Make a

reconciliation of the accounts payable ledger with the main account summarizing the ledger.

Furthermore, ensure that cash disbursement is match to any reductions in accounts payables and

subsequently check the whether suppliers were paid the similar amount as stated. It is also vital

to check the amount which cannot be matched in an account is deemed not to have occurred. In

addition, main suppliers of the company should be contacted. Match.com monthly reports should

match up with what it stated by the company as well as catering for more detail on situations

whether there are discrepancies. A more detailed, thorough analysis might help in detecting

missing information. Check that Match.com values for the accounts payable is up to the

standards accounting procedures. Furthermore, the company should present the account payable

balance according to the standards layout. Account payable should be presented as an account

liability in the financial position of Match.com, and any up normal transactions should be
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disclosed. Considering the trend analysis: sales (14.1%), Net income (7.7%), net income

increases in respect with an increase in sales whereas total liabilities (24%), and account payable

(3.5%), this depicts that depicts that account payables are understated meaning there is high risks

of RMM.

Existence/Occurrence: This entails checking of the recorded account payable whether it is valid

liability or not at the statement of the position date. Furthermore, Match.com should make a

confirmations that are used even if it is small and zero balances should sampled all just like large

balances. In cases where orders are placed with the supplier on consistent basis, confirmation

must be acknowledge to the supplier in regard to the balance due at the financial year end.

Additionally, vouch recorded payables to documentation should also be ascertained. In such

circumstances that the data in the balance sheets is found to have material misstatement on the

assertions that have been selected, it is deemed that RMM is high. After checking considerably

using substantive tests and procedure, ignore the three assumptions that were involved in the

ascertainment. In this case however, after going through Match.com financial statement of

affairs, it’s clear that all the assertions exist with no misstatement.

Valuation of accounts payable: Inventory should be acknowledged at the lower of the cost and

net possible value in accordance with the international Accounting Standard 2 Inventories.

Furthermore, check on any costs that could not be reasonably accounted to the cost of production

and any unexpected wastage have to be excluded for the cost of the inventory. Also ascertain any

conventional valuation basis that have been used to value inventory cost at end of the accounting

period. Match.com can record accounts payable and purchases net supplier discounts, this lowers

account payable. GAAP allows this method but Match.com should not be valued higher than
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15%. Therefore, considering this with the account payable (3.5%), its shows that there is no

misstatement thus RMM is at low.

In conclusion, the study recommends that a proper risk assessment should be established so that

any discrepancies in the financial records are corrected on time. It is also recommended that

before an auditor makes any engagement with the management, they should have proper

understanding of the organization that they intend to audit for the next one year.

REFERENCES

Bentley-Goode, K. A., Newton, N. J., & Thompson, A. M. (2017). Business Strategy, Internal

Control Over Financial Reporting, and Audit Reporting Quality. Auditing: A Journal of

Practice and Theory.

Chepkwony, c. L., (2017). Audit of Statement of Financial Position (SFP) Items (1st ed.).

Peecher, M. (2017). SSA & Internal Controls; Sean Hillison Pinch Hitting For Mark Peecher;

University Of Illinois, Urbana Champaign.

Peecher, M. (2017). Strategic Analysis Of A Client And Its Business Processes. University of

Illinois; Urbana Champaign

Peecher, M. (2017). Wrap up internal control, Start significant business process: Inventory.

University of Illinois; Urbana Champaign

Saracco, C., & Ruzalski, E. (2017). IT Auditing: An instinct for growth (1st ed.). GrantThornton.
Running head: RISK ANALYSIS MEMO 7

Street, O. F., & Park, E., (2016). United States Securities And Exchange Commission

Washington, Dc 20549 Form 10-K.

Vrijens, B., & Urquhart, J. (2014). Methods for measuring, enhancing, and accounting for

medication adherence in clinical trials. Clinical Pharmacology & Therapeutics, 95(6),

617-626.