Audit of Home Improvement Retailers

3964 Words May 16th, 2014 16 Pages
Audit of Home Improvement Retailors

Home Depot and Lowe’s are both large successful home improvement retailers. This paper discusses the background of both companies and goes into detail about the financial ratios including profitability and liquidity ratios. The paper also discusses business risks, audit risks, and the proper audit procedures that are necessary. The paper focuses on audit procedures of three important asset accounts: Cash, inventories, and accounts receivable.

Team Members: Julie November Shuai Guo Wenqian Zhu Yusi Zeng Zongxian Wang

Background Yusi Zeng No matter if customers are a homeowner,
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Internet sales are growing rapidly within the industry, and amongst all retail, eventually they might start to see Amazon as a major competitor. Stores like Home Depot and Lowe's have interactive websites, with the ability purchase items not seen in stores, how to guides, project ideas, and quotes for specific jobs. Trends in the industry are moving to more green products, private label and exclusive brands, more interactive retail experience with new payment options. This would utilize modern technology to increase sales. Demand which has been driven by home remodeling and building doesn’t fluctuate too much, typically minor shifts within the economic cycles. Home Depot and Lowe's believe in big warehouse space, an informal atmosphere and low prices. They are able to offer the lower prices to consumers due to their purchasing power. Inventory differs depending on the story type, home centers typically sock more lumber and building supplies, as their biggest customers are contractors. They pay their floor employees minimum wage, and keep overall costs down by keeping them as part time employees. Companies are growing by bringing in new stores to new locations rather than come up with innovation in the terms of bringing the products to the consumer. As written in business insights, the industry is recession proof but personally we believe that the companies’ sales are
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