Maximizing Business Wealth: Understanding the Entity and Analyzing Financial Performance of Amazon

MAXIMIZING BUSINESS
WEALTH

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Wealth maximization in business involves maximizing shareholder's wealth through generating
maximum returns for them. Also, from the perspectives of financial management, wealth
maximization means maximum or enhancing the price of company's common stock which in
turn increases the business' s value (Argilés-Bosch and et.al., 2020). This could be possible
through consistent increase in the company's profitability and cash flow generation. In this
project report, the discussion pertaining to the audit and assurance and taxation will be done in
the context of Amazon.com Inc. which is a US based multinational company operating in
technological sector whose focus is on e-commerce, digital streaming, artificial intelligence and
cloud computing. It is among the big five companies of USA's IT industry and is headquartered
in Seattle, Washington, US. In this report, discussion will be done regarding how auditor's gain
knowledge about the entity and its environment and how analytical procedure has been utilized
to understand by computing and interpreting key ratios calculated from the company's financial
statement. Also, the importance of taxation, principles of computing transfer value and various
other tax planning and calculations associated with different events of an individual.
MAIN BODY
Description of Amazon company
Amazon In was one of the American multinational technology company whose focus in
on E-commerce business, cloud computing, digital streaming and artificial intelligence. The
company was founded in the year 1194 with having around 27 years of experience in E-
commerce business. The company basically provide the online buying and selling of products to
their clients which includes Business to Business (B2B) and Business to Consumers (B2C).
Amazon company have its operation all around the world and serve its customers with the best
service of products delivery. Amazon is one of the leading and growing e-commerce business
because it comes under the Big Five companies including Google, Apple, Facebook and
Microsoft.
Jeff Bezos, founder of Amazon company has expanded into variety of products and
services category such as web service, satellite internet company, whole food market etc. The
company have its headquarter of company was in Seattle, Washington, US. Also, the financial
and operation performance of e-commerce business is best. It is because, Amazon has earned

revenue of US$ 386.064 billion in the year 2020 along with the operating income of US$ 22.9
billion in the same year. Beside this, in the year 2020, the number of employees worked in the
business is 1,468,000 along with the net income, total assets and total equities of US$ 21.331
billion, US$ 321.2 billion and US$ 93.404 billion (Timpe and Kaplan, 2017).
Process of Understanding the Entity
The process of understanding the entity and its environment helps the auditors to identify
the nature, procedure and internal control of the business. As per International Standard on
Auditing (ISA-315), the auditors need to perform the audit procedure to obtain the
understanding of entity and its environment. The audit procedure will help the auditor of
Amazon to understand the company, e-commerce industry and its environment such as internal
control, risk of material misstatement, relevant assertion levels. This procedure is also known as
risk assessment procedure which helps the auditors to identify whether Amazon has prepared its
financial statement fair and truthfully or not. The risk assessment procedure which auditor have
to perform includes the inquiries of management, analytical procedure, observation and
inspection (Rose and et.al., 2017).
Inquiries of management is one of the process of risk assessment which helps the
auditors to understand the fraud and error within the business. For example, the external auditor
of Amazon company is Ernst and Young (E&Y) that perform the inquiries to identify the level of
fraud and error involve in the business. Further, they also need to identify that whether the
management of the company are involved in this fraud and error or not. The process of
management inquiry involve the conversation between the E&Y auditors and Amazon
management company where the auditors simply ask the management of the company about an
transactions nature and amount. This is basically the part of audit evidence and used by the
auditors to understand the nature of business and the e-commerce industry along with the
accounting transactions. However, it is quite hard for the auditor to consider the information
from inquiry as audit evidence and thus it is not appropriate for Amazon auditors that they use
only management of inquiry as audit procedure (Appelbaum, Kogan and Vasarhelyi, 2018). It is
advisable to the E&Y that they have to use other audit procedure as well along with this
procedure.