ADMINISTRATIVE ASPECTS OF A "LARGE" AUDIT
by Robert J. Gummer Partner, New York Office
Presented before the Accounting Internship Seminar, Wilkes College, Wilkes-Barre, Pennsylvania -February 1971
In administering any audit, whatever the size, many questions must be resolved, arrangements made, and details planned and executed before, during, and after the field work. In an audit of a large corporate enterprise, however, this administration and planning can become much more complex and varied. Obviously, therefore, in the latter instance the time devoted to these matters will be considerably more important.
Let us look at some of the complexities inherent in an audit of a large corporate enterprise. To place this subject in proper perspective a few exhibits are introduced later on to assist us in comparing the condensed financial statements of a typical "small" company (the Minor Manufacturing Company — a closely-held company operating from one manufacturing and accounting location) with those of a large corporate enterprise (identified for our purposes as The Diversified Corporation — a publicly-held company operating from many locations). Please note that in neither case do the financial data shown relate to existing companies, and as is frequently said in the writing of fiction, any resemblance to existing companies is purely coincidental. The financial statements, of course, are typical of those usually found for companies such as these. For example, compared with the ranking in Forbes Magazine's1 500 Biggest Listings, Diversified's total assets of $1,630,215,000 would entitle it to rank as the 140th largest corporation in the United States (on the basis of total assets) and its net income would enable it to rank 58th. Also, in identifying Minor as a small company, we do so only from the standpoint of relative audit complexity and in relation to its size compared with that of the typical large publicly held corporation. Obviously, by some standards a company with total assets of over $9,000,000 is large, but not when compared with companies such as Diversified.
Looking first at the balance sheets (Exhibit 1), you will note quite a few similarities — i.e., each has cash, receivables, inventories, fixed assets,
1 "Dimensions of American Business," 2nd Annual Directory Issue, Forbes Magazine,
May 15, 1970.