Johnson and Johnson Orginzation

Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences

A structure depends on the organization 's objectives and strategy. In a very centralized structure, the highest layer of management has most of the choice creating power and has tight management over departments and divisions. In a much suburbanized structure, the choice creating power is distributed and also the departments and divisions could have totally different degrees of independence. Wal-mart’s structure is built upon its risk management, safety and claims management process. Google Inc. has gained much attention and acclaim for its unusual organizational culture, which is designed to establish loyalty and creativity. Although both Google and Wal-mart focuses on risk management and they specialized on two different factors. Google focus more on creativity, loyalty and keeping its employees happy. Wal-mart tends to help customers by saving money, claims and promoting within the company.

According to the Sarbanes-Oxley Section 404 Act, it is the responsibility of the management to establish and maintain internal controls required for financial reporting. The company’s latest year assessment of

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate (Louwers & Reynolds, 2007). We believe that the audit evidence obtained is sufficient and appropriate to provide a reasonable basis for our opinions.

The Sarbanes-Oxley Act (SOX) is a legislation enacted in 2002 under the sponsorship of U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). The law introduced increased government oversight for publicly held companies. It also imposes additional management responsibilities and corporate operating costs on companies trading under SEC regulations. Sarbanes-Oxley was enacted in direct response to a number of corporate accounting scandals, including those of Enron, Tyco International, and WorldCom.

Most of Johnson and Johnson's success can be attributed to its emphasis on decentralized management, which allows for greater focus as the

Section 404 of the Sarbanes-Oxley Act requires management to evaluate and test the effectiveness of their company’s internal controls over financial reporting. The company’s auditor has to issue a formal report on management’s evaluation of its controls.

During the performance of this integrated audit, require numerous judgments about the internal control and overall financial reporting and how well it addresses risks of material misstatements within the financial statements (AICPA, 2014). After re-evaluating the previous errors found from the previous audit, the audit team found the corrective actions to be appropriate and justified in elimination of human error by implementing additional checks and balances within the manual process. No additional misstatements have been found and all internal controls off the financial reporting seem appropriate and just.

Professional trends, particularly the demand for faster reporting of financial information as suggested by Securities Exchange Commission’s (SEC) recent reporting period change[2], put pressure on auditors to rely on internal rather than more persuasive external evidence items (CICA, 1999; Bierstaker et al., 2001; Helms, 2002; Hunton et al., 2003; LeGrand, 2002; SEC, 2002, 2005).

The final responsibility for the integrity of an SEC registrant’s internal controls lies on the management team. U.S. companies need to refer to a comprehensive framework of internal control when assessing the quality of financial reporting to determine that financial statements are being presented under General Accepted Accounting Principles, GAAP. The widely used framework is referred as COSO, Committee of Sponsoring Organizations of the Treadway Commission, sponsored by the following organizations American Accounting Association, the American Institute of CPA’s, Financial Executives International, the Institute of Internal Auditors, and the Institute of Management Accountants. COSO’s defines internal control as:

The purpose and responsibility of an audit is to provide reasonable assurance that the financial statements are free from material misstatements whether due to fraud or error. The audit will follow the authoritative guidance provided by the PCAOB and AICPA auditing standards. In relation to Johnson & Johnson Company, it would be a plus if the auditor had experience with the Consumer, Pharmaceutical and Medical Devices, but not necessary since a firm would be able to hire an expert to consult on the audit. The test will cover risk assessment procedures, tests of controls and substantive procedures.

Johnson and Johnson has a bandages line called, Band-Aid, Tylenol medications, Johnson and Johnson baby products, Neutrogena skin and beauty products, clean and clear facial washes, and Acuvue contact lenses to name a few. Johnson and Johnson is also a part of the Dow Jones industrial average, and is listed among the big fortune 500. In 2015 alone Johnson and Johnson worldwide made $70.1 billion in sales alone. Johnson and Johnson is a popular company that many families trust and love. The objective of the company’s market is to maximize profits, to help the shareholders. Johnson and Johnson objective is to lower their prices on their products and limit their need for customization for their manufactured products except maybe for packaging changes. Johnson and Johnson has adopted a new approach early in the 1990s, called a decentralized approach. The approach they believe helped improve their company and the wat things are run. Their purpose in the business is to care for the health and the well-beings of others around the world. Johnson and Johnson has achieved both economics of scale as well as economics of scope. The company’s products are sold in more than 175 countries worldwide and its revenues accumulate to 24.6 billion worldwide. The company also has more than 29,925 internet domains which helps sell their products as well as increase the revenue growth.

Johnson & Johnson was founded in 1886 by a New England Druggist named Robert Wood Johnson. Robert had his ingenuity inspired when Joseph Lister revealed that infections in the operating room were caused by airborne germs. Robert joined with his brothers, James and Edward, and started producing dressings in New Brunswick, New Jersey in 1886. They started with only 14 employees and were situated in an old wallpaper factory. Johnson and Johnson became incorporated in 1887. (Johnson & Johnson)

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

Section 404 requires public companies to establish internal controls and report annually on their effectiveness over financial reporting. The CFO and CEO are held personally responsible for the internal controls via the requirement to sign a statement certifying the adequacy of the internal control system (Moffett and Grant, 2011, p. 3). Additionally, the company’s independent auditor must issue an attestation regarding management’s assessment of the internal structure as part of the company’s annual report (Bloch, 2003, p. 68).