Analysis Of Cvs Health Corporation's 2014 10 K Report

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Background: According to CVS Health Corporation’s 2014 10-K report, the company contains three reportable segments: (1) Pharmacy Services, (2) Retail Pharmacy, and (3) Corporate. The Pharmacy Services segment provides Medicare, specialty & mail order pharmacy, prescription management systems, clinical services, and disease management programs to those in need. The Retail Pharmacy segment entails the entire CVS store itself, which contains the pharmacy, minute clinic, and front store selling merchandise. Prescription drugs accounted for about 70% of the company’s net revenues for the past three years (U.S. SEC Form 10-K). The purpose of this memo is to address the topics of inherent risk, control risk, and detection risk. We will do this by addressing an accounting policy stated in the company’s 10-K report. We will discuss risks associated with the accounting policy, recognize company controls, and test those controls. Substantive analytics and tests of details will follow. Lastly, we will discuss fraud and extended procedures to detect fraud. To end, we will conclude by outlining the main points and emphasizing our audit plan. Accounting Policy and Assertion Evaluation The significant accounting policy that we’ve decided to review would be CVS Health Corporation’s revenue recognition policy. We are most concerned about the company overstating sales revenue and adding fictitious sales (Louwers, Ramsay, Sinason, Strawser, Thibodeau, 2015, pg. 272). According to the

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