Overlook Video Stores Inc Essay example

5132 Words21 Pages
Overlook Video Stores Inc. (OVS) To: Ms. Alice Hartford, Partner From: CA, Audit Senior Re: Planning for the year end 2009 of OVS and requested control deficiency information Engagement Overview The purpose of this memo is to document the planning of the financial statement audit st engagement of our client Overlook Video Stores Inc. (OVS) for the year ended December 31 , 2009. OVS has been our client since its inception in 1998. This year’s audit will commence January, 2010, though certain procedures have already taken place to ensure our opinion can be given promptly, as requested by OVS’s bank. OVS is a privately held company, headquartered in Toronto and operating in the DVD rental and retail industry. OVS has over…show more content…
The RP Program, a customer loyalty reward initiative, has had very few participating customers taking advantage of its incentives for repeat business (only 92,000 RentPoints redeemed, representing $92,000 spent in OVS). The MBM program has had serious complications in its implementation specifically relating to website integrity and numerous crashes. Frustration over the program has caused some customers to cancel their memberships or be offered some compensation (eg. 2­month free memberships). Overall BR Assessment: The highly competitive industry has decreased OVS’s market share thereby driving them to match competitor’s prohibitively low prices or venture into new markets and take measures to remain competitive. Management has no experience/expertise in this area and because these new initiatives have largely failed in this objective, we feel we must assess OVS’s BR as medium­high. → Factors Increasing Inherent Risk (IR) ∙ IR is increased by the unique store inventory accounting policies chosen by OVS and the resulting issues of obsolescence/valuation. This increases the RMM in the various Inventory accounts relating to valuation. ∙ IR is (potentially) increased by any binding covenant (that may be) associated with the ten­year loan OVS has been extended by their bank to help finance its rapid expansion. If such a covenant exists, there will likely be

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