S

LO6Audit Plan

Material Amounts

Sales 11,691,000 x 1%= $116,910 (materiality

estimate)

Total Assets 8,983,000 x 1%= $89,830

The range for planning materiality is between 89,830 and 116,910 dollars in a given account

Based on the company’s steady growth of sales and their amount of obligations to both creditors and investors, we have selected 105,000 as a reasonable amount for planning purposes

Material Types of Transactions

booking conventions

financing debt

purchasing land for future hotel prospects

High Risk AreasAsset Impairment Account

Unusual high impairment charge to their timeshare strategy account in 2009 during a bad economy

No impairment charges in both 2008 & 2010 Higher Net Income due to lack of depreciation of the

asset in 2010 Opportunity to impair the asset in the “bad year”

without their Income being significantly lower than competitors

Changes in Net Income

In 2009 Marriott suffered net loss of 353 million Due to the journal entry that was made:

Credit to Asset account and Debit to a Loss account

In 2010 Marriot recorded net income of 458 Asset was taken off the books in the previous year No depreciation needed to be recorded in the

current year

High Risk AreasPressure to Reach EPS

Possible manipulations of EPS due to high levels of competition Net Income significantly differed between 2009/2010 due to

the asset impairment in 2009 Higher EPS in 2010 due to higher net income Auditor should audit:

Asset Impairment Account Revenue and Expense

Especially, Service Revenue and Depreciation Expense Accounts

Check if these accounts were accrued in accordance to GAAP Number of shares outstanding

check for any unusual purchases of Treasury Stock

High Risk AreasFootnotes

Subsequent Events Marriott has properties in countries like

Libya, Egypt and Pakistan Possible impairment of assets due to them

being located in unstable countries

High debt obligations

Marriott high contractual obligations like debt, capital lease obligations, both recourse and nonrecourse operating leases, long-term liabilities

All equal to 5,121 million. An auditor should audit Marriott’s short and long-term

payables and fixed asset accounts.

Low Risk Areas

Inventory Accounts Service company and not a Merchandiser Inventory sold is at low levels

Cost of Goods Sold that relates to the goods available for sale at the shops or restaurants

Receivable Account Most clients must pay up front with either cash or a

credit card

Uncollectible Accounts Tie directly to the Receivables

Control Risk

Both internal and external risks assessments have to be taken into consideration when evaluating whether or not control risk should be reduced.

Marriott’s control risk has to be assessed accordingly to the probability of any loss occurrence and the estimated amount as well as the company’s investment in internal control.

We were unable to find any evidence that Marriott has invested in the quality of their internal control or if they anticipate any loses in the near future.

In our opinion, the assessed control risk shouldn’t be reduced.

If the company increased the quality of their audit function, the control risk should be re-evaluated.

How is audit allocated geographically?

Ernst & Young has conducted an integrated audit in which they gathered evidence to support opinions on Marriott’s consolidated financials and system of internal controls

E&Y audits Marriott’s financial statements nationwide and worldwide. strengthens credibility of Marriott’s financial operations ensures compliance of Marriott’s consolidated financial

statements and disclosures with GAAP (or iGAAP) as well as regulatory and statutory regulations within each state or country

reduces risk for potential misrepresentation or fraud, which encourages US investors to invest not only nationwide but also globally

E&Y should audit Marriott’s assets that are located globally to check for possible impairment

Qualified Opinion

Marriott’s financial statements and their internal control are in compliance with GAAP and statutory requirements and regulations are free of material misstatements and errors.

An auditor concluded that Marriott gave a fair and true representation of the company’s operations and their financial condition, which gives reasonable assurance regarding reliability of financial reporting.