Dell Audit Solution

Case 2.2

Instructional Notes

Dell Computer Corporation:

Evaluation of Client Business Risk

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|Mark S. Beasley, Frank A. Buckless, |

|Steven M. Glover, Douglas F. Prawitt |

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INSTRUCTIONAL OBJECTIVES

• To provide experience with obtaining and reading a form 10-K report.

• To provide experience with identifying information relevant for assessing a client’s business risks.

• To provide experience with linking business risks to audit implications.

• To provide experience linking an audit client’s business risks to risks of material financial misstatement.

• To provide experience with writing a formal business memorandum.

KEY FACTS

• Dell Computer Corporation (Dell) is a publicly traded company (NASDAQ) that had 2,459,003,783 shares of common stock outstanding with a trading price of $40.20 as of February 25, 2005.

• Dell designs, develops, manufactures, markets, services, and supports a wide range of computer systems, including desktops, notebooks, workstations and network servers.

• Dell’s products are sold in more than 170, countries and it has manufacturing facilities in Round Rock, Texas; Limerick, Ireland; and Penang, Malaysia.

• Dell’s net revenue for fiscal 2005 was $49.2 billion while net income was $3.0 billion. Revenues are normally strongest in the second and third fiscal-year quarters.

• Dell is required to have an annual audit pursuant to the 1934 Securities and Exchange Act.

• An assumption stated in the case materials...