RIM Audit Planning Memo

RIM Audit Planning Memo

To: From: Date: Re:

Fred Pries

19-Nov-09 Your call from 12.12.2005

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Understanding Equity of RIM Research in motion is one of the leaders in the Communication industry providing customers with innovative communication devices since 19991. The nature of RIM business focuses around providing business users and consumers with innovative solutions to the worlds ever growing communication needs. The company has gained a large portion of consumer market appealing to the younger generation with social networking solutions such as Facebook, blackberry messenger and emails on the go. While continuing its appeal to the niche market of business users providing high status companies with secured email platforms and applications to manage functions such as millage, budgets and on the go document editing programs. The objectives of RIM is to make a difference, performing with integrity ,honesty and transparency to investors and Committing to social resposibility.2All these practices are delineated within the business standard and principles. To elaborate further the company believes that success happens when everyone shares the goal we want to achieve.3 This code is included in every facet of the companys business through management responsibility, suppliers and board of directors and employees. Furthermore the company ensures that all business transactions are conducted with the utmost integrity to ensure fair customer advantages avoid situations such bribery, money laundering and other situations such as respect of colleagues. Finally the company relies on internal controls to provide users of the financial statements with full and transparent records without deviation from the accepted accounting practices. As a company RIM has a vast variety of products and services to provide their customers with a diversity of options that meet their needs. Through designs manufacture and markets wireless communcation solutions to international markets. The services provide customers with instant access to messages, emails and applications through blackberry application world. Blackberry messengers is one product in particular has set RIM apart from other cell phone manufactures. The core products within their business are tablets, Smart Phones and Blackberry devices. RIM invests a substantial amount of monetary amounts in research and development with serve as a key feature of RIM success. The company strives to be the leader in the communication industries products and services which rest in the companies ability to maintain the best talent and funding for R&D and develop better products than its competitors RIMS RISK: Given the nature of RIMS business they are a variety of inherent risks that will affect the companys solvency, liquidity and ability to be a sustainable company. Bellow will indicate the some of the risks of RIM within throughout 2011 and 2012.

Currency: RIM itself exports devices and items to different companies across the world today resulting in cash being denominated in foreign currencies. Evidence of this is shown in the February 26th approximately 59% of cash and cash equivalents, 25% of
accounts receivables and 8% of accounts payable are denominated in foreign currencies Much of the currency held is the Euro. The risk that the company runs is the volatility of the economy, given the euro goes down in value the company results in

a loss of profit. There is an inherent risk that there may be errors in the recording will occur. Assertion: to evaluate materiality of such accounts an auditor would be recommended to evaluate the existence of the account receivable for currency and the rate at which the company will be paid in. The valuation and allocation of the currency should be evaluated determine the value that should be stated on the face of the financial statements. Revenues: The revenues have been falling throughout 2012 within the second quarter decreased by 15 percent from the first quarter, which is also 10 percent lower than the same quarter the past year. The decrease in revenue can result in a decrease in the current ratio which may affect the companys agreements with different financial institutes. Assertions: Focus on ensuring the existence and occurrence of revenues to ensure the event has in fact occurred. Furthermore to ensure that the cut-off of transactions have recorded in the correct period in which they were inquired. This is especially important as the companys incentive to overstate revenues and assets is increased. Inventory: Technology is ever changing in this type of industry causing inventories to be useful for a shorter span of time resulting inventories becoming obsolete. This may result in the company understating remaining inventories and can result in added sunk costs. Another issue that can affect inventory is the contracts that the company has with wireless service providers and suppliers as inventories can be sent out on consignment therefore the ownership of inventories may result in a misstatement of inventories on the financial statements. Assertions: it is recommended to take a look into the existence of the inventories as well as who owns the rights an obligation of these inventories .Testing for the cut-off period would also ensure the inventories are correctly stated. Accounts Receivable: As mentioned a large portion of revenue is with foreign accounts causing a concern as allowance for doubtful accounts remain the same as 2010 regardless of the increases in accounts receivable at 2011 year end. By omitting the increase in bad debts the company can increase the net income. assertion: it is recommended to take an in-depth look at the occurrence of accounts receivable and the accuracy of the the calculations. This can be done by recalculation, confirmation of invoices sent out.