University Report: Business Technology and Accounting Process Analysis

This report analyzes the business technology and accounting processes, specifically focusing on inventory valuation and audit reports. It details the valuation of inventories, emphasizing the lower of cost or net realizable value, and the application of FIFO. The report also explains audit reports, including their purpose, the different types of opinions (clean, qualified, adverse, and disclaimer), and the responsibilities of auditors. Furthermore, the report highlights the significance of audit reports for accountability, reliability, and the scope of the audit, providing a comprehensive understanding of these crucial accounting elements and how they relate to financial statement analysis. The report includes references to support the information.

Running head: BUSINESS TECHNOLOGY AND ACCOUNTING PROCESS
Business technology and accounting process
Name of the student
Name of the university
Student ID
Author note

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Table of Contents
Answer (a)..................................................................................................................................2
Valuation of inventories.........................................................................................................2
Answer (b)..................................................................................................................................2
Audit report............................................................................................................................2
Purpose of audit report...........................................................................................................3
Reference....................................................................................................................................5

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Answer (a)
Valuation of inventories
The inventories of Domino’s Pizza are recorded at lower among the cost or the net
realisable value. The net realisable value states the estimated price of sales for the inventories
reduced by all the estimated costs for completion and the costs (Shusheng pp. 541-544) On
the other hand, the costs include appropriate portion of the variable and fixed overhead
expenses that are assigned to the inventories through the method that is most appropriate for
each specific inventory class where the major portion are valued on the basis of FIFO (first-
in-first-out).
In accounting context the term net realizable value is anticipated selling price of the
inventory under normal business course that is reduced by expected cost of completion,
transportation and disposal. However, these measurements are subjective and require various
judgements for the determination. Further, it is noteworthy that the net realizable value is not
used in case where the company use LIFO (last-in-last-out) method for inventory valuation
and here the market value is used instead of the net realizable value (Haribhai-Pitamber and
Dhurup p. 81) The adjustment of lower among cost or net realizable value is taken up for
each inventory item or for the aggregate of the inventory. Once the inventory is written down
to the net realizable value the loss shall be realized at the profit and loss account and the
inventory account will be the new basis for the purpose of reporting and valuation. The
inventory value is examined on continuous basis to identify whether there is any signal of
obsolescence, spoilage, damage or demand reduction from the customers. Further, writing
down the value of inventories prevents the business to carry forward any loss to be
recognized in the future period. Therefore, the use of the net realizable value is the way of
enforcing conservative recordation of the values of inventory assets (Sultana et al. pp. 72-87)
Answer (b)
Audit report
The audit report is the written opinion issued by the auditor regarding the financial
statement of the company. The audit report is written in standard format as required by the
generally accepted auditing standards (GAAS). As per the requirement of GAAS the auditors
allows or requires specific variations under the report based on the circumstances of audit

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work under which the auditor is engaged (David pp. 137-142). A typical audit report includes
3 paragraphs that cover the following elements –
 Responsibility of auditor and management of company
 Opinion of auditor for the financial statement of the organization.
 The scope of audit.
The audit report is released by the auditor to the user of the company’s financial
statement. The user of the audit report may rely on the report as the evidence as it is deemed
that the knowledgeable 3rd party has scrutinized and expressed an opinion on financial
statement. The audit report that includes the clean opinion is required by various lenders
before lending the loan to the company (Mai and Pham. pp. 490-512). The clean report is also
necessary for the public held company for attaching relevant audit reports to the financial
statement prior to filling it with Securities and Exchange Commission. Generally, the
following types of reports are issued by auditor –
 The clean opinion is issued by the auditor where the financial statements are
presented by the company truly and fairly with regard to the financial statement
 The qualified opinion is issued by the auditor if there is any chance of limitation that
were applied by the work of the auditor
 Adverse opinion is issued when the financial statement of the company is materially
misstated
 Disclaimer of opinion can be led by various situations, for instance, the auditor may
face independency issues or the company may have going concern issues with
auditor.
Purpose of audit report
Various purposes of audit report are as follows –
Accountability - main purpose of the audit report is to conduct the audit of the financial
statements with regard to the fact that the person who prepares the financial report has
different view from the management of the company. Financial statements of any company is
the main source for the accounting the management’s performance through the shareholders
(Kym, Harrison and Ross pp. 54-74). However, as management is accountable for preparing
the financial statement, the shareholders rely on the external verification by the auditors for
gaining reasonable assurance that accounts of the company are free from the material

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misstatement and therefore can be depended upon for the true and fair presentation of the
company.
Reliability – in addition to requirement of the users, the financial statement users may require
to rely upon the financial statement for various other purposes. These are as follows –
 The financial institutions need the audited accounts from the borrower’s aspect to
assess the credit risk through analysis of the liquidity and financial position.
 Tax authorities depend on the audited financial reports of the company for
determining accuracy of the tax returns filed by companies.
 Management uses the audit report for re-evaluating the risk management procedures
of the company and the system of internal control through considering the opinion
issued by the external auditors while the audit is carried out.
Scope – audit of the financial statement is intended for the purpose of providing reasonable
assurance with regard to the accuracy of the financial statements. Therefore, it does not
deliver the absolute assurance that financial statements are free from all type of
misstatements. The purpose of the audit is to offer reasonable assurance to avoid excessive
cost and time in performing the audit that may eat up the benefits derived from enhanced
assurance (Christensen et al. 71-93). However, the absolute assurance is also not able to
provide guarantee under most of the cases owing to the inherent limitations associated with
audit.

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Reference
Butcher, Kym, Graeme Harrison, and Philip Ross. "Perceptions of audit service quality and
auditor retention." International Journal of Auditing 17, no. 1 (2013): 54-74.
Chou, David C. "Cloud computing risk and audit issues." Computer Standards &
Interfaces 42 (2015): 137-142.
Christensen, Brant E., Steven M. Glover, and Christopher J. Wolfe. "Do critical audit matter
paragraphs in the audit report change nonprofessional investors' decision to
invest?." Auditing: A Journal of Practice & Theory 33, no. 4 (2014): 71-93.
Dao, Mai, and Trung Pham. "Audit tenure, auditor specialization and audit report
lag." Managerial Auditing Journal 29, no. 6 (2014): 490-512.
Gu, Shusheng. "Research and analysis on issued inventory valuation methods of
enterprises." Balance 50 (2013): 541-544.
Haribhai-Pitamber, H. U., and M. Dhurup. "Inventory control and valuation systems among
retail SMEs in a developing country: An exploratory study." Mediterranean Journal of Social
Sciences 5, no. 8 (2014): 81.
Sultana, Nigar, Harjinder Singh, Van der Zahn, and J‐LW Mitchell. "Audit committee
characteristics and audit report lag." International Journal of Auditing 19, no. 2 (2015): 72-
87.