Dandelion Company Case Study Solution
The case is based on the Dandelion Company, which is a public company. The fiscal year of the company ends on December 31st. The Company has issued yearly and quarterly merged financial reports, prepared as per the US (GAAP), which is generally accepted accounting principles. This report is about performing the integrated audit of the Company’s yearly US GAAP consolidatedfinancial statements as per the Public Company Accounting Oversight Board,also known as PCAOB. According to the history of the company; it has invested nearly 70 times in portfolios that include: the US treasury and exchange-traded equity, asset-backed security, corporate debt security and mortgage-backed security. The levels have also been given to the portfolios as level 1 for the US treasury and exchange-traded equity, with the rules of ASC 820 fair value and level 2 for other securities of mortgage-backed, corporate debt, and asset-backed. Moreover, currently the company does not have any other security that could be classified in level 3.
The Dandelion Company’s balances of investment for September 30th, 2012, shows each of the securities. The book values of the securities as of 2012, for the US treasury, agency andmortgage-backed, asset-backed and corporate debt are: $773, 5979, 866, 306, 707 and 1543, respectively. All of these book values are in millions. Gains on debt securities are: $2, 98, 13, 1, 4, and 35 for the US treasury, agency, mortgage-backed, asset-backed and corporate debt, respectively.
Losses on securities for the US treasury, agency, mortgage-backed, asset-backed, and corporate debt are: $0, 1, 5, 1, 1 and 3 separately. The fair value of each security is calculated by adding the gain in the book value and subtracting the losses. So the fair values for the US treasury, agency and mortgage-backed, asset-backed and corporate debt are:$735, 6.76, 874, 306, 710, and 1575, respectively. The total book value of the securities for 2012 is $10134, gain $153, loss $11, and fair value $10276. Equity securities have a book value of 403, gain 4, loss of 58, and fair value of 349.
Additionally, the arrangement of types of investments by their level for September 30th, 2012, is the same with the classification of December 31st, 2011 as the securities of level 2 of September 30, 2012. The use of “Control Reliance” has been planned. It is the way to deal with addressing the risks of material error and declarations, identified with the company’s investment account balance. This approachincludes distinguishing and testing the working viability of the controls that address the risks of material incorrect statement.The company’s investment experts are extremely experienced and have suitable are capable of costing and screening the company’s investment exercises. Based on connections during the audit methods;it is believedthat the VP of the treasury and the risk supervisor are experienced and have the related experience………………………………….
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