Coca-Cola Audit Risk Assessment

This assignment analyzes the audit risk assessment of Coca-Cola, particularly concerning its internal control weaknesses and potential for misstatements in financial reporting. The analysis emphasizes the importance of identifying key risks like non-repayment of loans and overstating stock value due to goodwill. It also discusses the auditor's role in conducting tests of controls and substantive procedures to mitigate these risks.

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AUDIT CASE STUDY

CASE STUDY
Coca cola is one of the growing companies in the world. The Coca-Cola Company is
observing to tap into this grow have a rapid growth, and the business is concentrating on
creating India its third main market (and also in a time frame), up from its present sixth
location. Diversification into a wide diversity of drinks is one of the important emphasis
areas for Coca-Cola to have a good drive. While effervescent soft drinks now account for
nearly 50 percent of the Indian market of soft drinks, ovary and dairy-based brews are
increasing at a faster pace
What is risk
Risk is the danger modeled by any error in the monetary statements due to any failure of
any control. In a monetary audit, characteristic risk is greatest probable to happen when
dealings are multifaceted, or in any type of situations when there are high amount of
judgment in respect of any monetary estimate or dealing. This type of menace
epitomizes a worst-case setting as all the controls have failed drastically. Coca-Cola
Company is an worldwide business that functions in a worldwide market. The object
expresses numerous monetary risks for example variation in product prices, foreign
argument rate, rate of interest, political constancy and slump. These financial dangers

modeled a huge difficulty in the endurance of the process of the commercial. Industry
Precise Audit Risk One of the biggest assets of a corporation is stock and the panels for
stock would make unquestionable all stock on the balance sheet really exists. A
commercial should have a proper separation of obligations so that no lone individual
knobs all or most facets of the stock, such as contract, authorization, grounding, and
imbursement (Risk assessment and materiality 2016)
Inherent risk –Valuation of monetary instruments
Coca cola on the financial accounts have very well written that the amounts are measured
at fair value. Influences that could unfavorably influence the Company's processes or
fiscal results embrace and are also not limited to the following terms: plumpness and
other well-being apprehensions; water insufficiency and poor class; fluctuations in the
nonalcoholic brews occupational situation; the new global praise crisis and current
disapproving recognition and equity bazaar settings; enlarged competition; an incapacity
to swell procedures in evolving and unindustrialized markets; fluxes in foreign cash
discussion rates; rate of interest increase. action 319 needs the examiner or auditor to get
an sympathetic of each of the five mechanisms of inside control adequate to strategies the
audit. It also takes in to consideration that such information should be secondhand to
recognize types of latent misstatements, contemplate factors that disturb the risk of
important misstatement, strategies tests of panels when related, and also strategies
tests(substantive). Stock has high inherent risk with nepotisms to esteeming its version or
account stability. Coca-Cola’s stock account balance is contingent on what value is
carefully considered for a creation work-in-process period to move into the finished good
stage and to evolve in to the finished product stage As the auditor has assessed if the

entity's packages and panels that speech known risks of important misstatement due to
deception have appropriately intended and located in process, the auditor should evaluate
these jeopardies and also it takes in to consideration all the evaluation. This calculation
should be painstaking when unindustrialized the assessor's answer to the branded hazards
of important misstatement which arises due to fraud. The auditors of Coca-Cola tested
with the help of the risk authorities the dimension of the fair values of the numerous
entrenched offshoots which includes the option to adapt the promissory note into
instruments of equity of the Corporation as part of the money or any type of
consideration transit transferred. In esteems to this achievements, the audit of the assets
and liabilities have been done. There are misstatements which resulted to address dangers
to the info systems, and also there is a continuation to continue to make savings in
workers, technologies, cyber cover and training of Business personnel. The Business
upholds an info risk management database which is overseen by information skill
organization and studied by a cross-functional committee. The potential misstatement is
the default by or disappointment of one or additional of our counterparty financial
institutes could source us to incur noteworthy victims. As part of the hedging doings,
there is an entry in to transactions connecting derivative fiscal instruments, which
includes forward agreements, product commodities contracts, option agreements, collars
and swaps, with numerous monetary institutions. In adding, there are lot of cash, cash
counterparts and other savings on credit or in books with particular banks or other
monetary organizations in the United States or anywhere else in the country. If we talk
about this misstatement we can say that as per accounting standard 11 a lot has to be
measured (PCAOB 2017)

3. The aim or the objective of the examiner is to classify and suitably measure the threats of
important misstatement, which provides a solid basis for conniving and realizing replies
to the threats of misstatements which have been material in nature. The examiner should
make risk calculation measures that are necessary to run a judicious basis for identifying
and judging the main risks of important misstatements, which is majorly due to error or
scheme of fraud ,and deceitfully for any further audit procedures. The determination is to
gain an empathetic of the corporation's purposes, plans, and connected occupational
threats is to find commercial risks that might judiciously be probable to outcome in
important errors or misstatements of the financial announcements. Balance inspection
objectives that should be definitely met and the checker can achieve that any given
accountequilibriumisjustlyspecified-
1.life
2.wholeness
3.correctness
4.organization
5.limit
6.detailtie-in
7.realizablevalue
8. moralities and commitments.
2. Any impact on the evidence mix
An auditor needs to have good amount of evidence to form an opinion. There can be qualified
opinion or a clean opinion. It depends on the audit evidences whether the auditor needs to

give which type of opinion. Risk of lawsuit if Coca-Cola is prosecuted for numerous
reasons produce linked or then and the Risk of hurt to standing if any bad reviews is
unconfined related to Coca-Cola’s corporate practices. The Risk of trailing prevailing and
future consumers who need a conflict of benefits with Coca-Cola. The evidence provided
the auditor has some inherent limitation as the evidence that has been provided is not
checked in detail. The auditor is giving an overall opinion based on some substantive
procedures and analytical procedures. Due to the inherent limitation some risks will not
be able to identifies and will be left out. Planned Discovery Risk is the danger that the
review sign collected will fail to notice (Risk management policy 2017)
Any danger or threat of the misstatements. Planned detection risk has an opposite
association with some quantity of indication calm for an review. I.e. if the intentional
discovery risk is squat, examiner will need to gather more indication. If intrinsic risk and
switch risk are tall, deliberate detection risk is low, it is important for the auditor to test
the contacts and not just testing the internal controls of the company.
Coca cola Inherent risk assessment
The Group Risk Forum is Coca-Cola HBC’s risk think tank and independent risk review
mechanism. Its members, recruited from the most senior business leaders across all
functions, contribute their experience and insight to the evaluation of the company’s risk
and opportunities. Stock has high inherent risk with nepotisms to esteeming its version or
account stability. Coca-Cola’s stock account balance is contingent on what value is
carefully considered for a creation work-in-process period to move into the finished good
stage and to evolve in to the finished product stage. Revenue credit has tall inherent risk

with respects to its wholeness and limit. Coca-Cola’s pays process is in need of how the
company recognizes the revenue. Goodwill has high characteristic risk in regards of
valuing the company and the account balances. Most of the of Coca-Cola’s stock value is
its make name and “underground formula” (Risk assessment and materiality 2016)
Understanding the manufacturing lets the auditor to assess the risk Coca-Cola currently
Is facing (ASA 315). It is the part of the auditor the check the important matters of the loan and
the account balances (Annual report 2016)
Auditor needs to observe to perceive if (Risk assessment and materiality 2016)
there are people who are not repaying the loan in time. By overstressing the stock, Coca-
Cola will be increasing the gross profits, net revenue, current possessions, reserved
earnings and also the other ratios. Illegal to know revenue early by fielding books open to
the end of the quantity period to amass more auctions. Since goodwill contribute to major
the assets sum and by this the stock would be misstated due to show up of more goodwill
value.
Coca-Cola Control risk assessment
The internal controls is not as perfect as it was expected from the company. The tests of
controls are extensive. Substantive and analytical procedures are kept at low level. The
test of details are medium. As a result, organization must make many molds which
involve a significant amount of decision when finishing recoverability and tests of
impairment of all the assists in the whole world. Depending on the functioning efficiency
of the entity’s panels, the examiner will project and perform practical tests absorbed at
the possible misinformation which may result from the recognized risks. As a part and

parcel of the risk calculation process, the examiner should regulate as which risks known
require unusual audit thought. Such jeopardies are referred to as momentous risks (ISA
315, pares 27–29). The accountant or the auditor should continually perform applicable
procedures that unswervingly retort to the substantial risk at statement (ISA 330 Para. 21)
Substantive procedures should be analyzed very carefully and it will help in the overall
audit.
References
Risk assessment and materiality(2016) Avila be at file:///C:/Users/com/Downloads/SampleChap
%20(1).pdf
Risk policy ( 2016). Available at https://coca-colahellenic.com/en/about-us/policies/risk-policy/
Team Trefis. Coca cola largest company. Avilable at
https://www.forbes.com/sites/greatspeculations/2017/09/07/how-coca-cola-plans-to-make-india-
its-third-largest-market/#293c8a232e84
PCAOB. Avilable at https://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_12.aspx
Riskmanagementpolicy(2017). Available at
https://coca-colahellenic.com/media/1123/group_risk_management_policy_2017.pdf
The Lancet. Coca-Cola's funding of health research and partnerships. Lancet. 2015; 386: 13
Andreyeva, T, Kelly, IR, and Harris, JL. Exposure to food advertising on television: associations
with children's fast food and soft drink consumption and obesity. Econ Hum Biol. 2011; 9: 221–
233

laberson, H. PepsiCo and Coca-Cola's profit aided by growth in emerging markets. July 21,
2011.
http://www.foodnavigator-usa.com/content/view/print/388021
Wasswa, H. Uganda struggles to cope with rise in diabetes incidence. BMJ. 2006; 333: 672
Annual report(2016). Cocacola .Available at
http://www.coca-colacompany.com/investors/annual-other-reports