Case Analysis
# 1 Determine your role
• What role are you taking?
– Are you management? The auditor? The
new auditor? A member of the audit
committee? A financial statement user
(e.g. investor or creditor?)
• What is required?
• What is the time line?
# 2 Identify the information
users and their needs
• What are the needs of the main information
user?
– Establish decision criteria, subject to constraints
– Identify possible biases
• Pervasive qualities: ethics, judgment, potential conflict
• Other users
– What information do they require?
# 3 Identify and rank case issues
• If more than one issue, rank according
to:
– Importance to users
• Also:
– Financial significance, sensitivity, urgency
– (Not necessarily by the amount of
information provided)
• Use ranking as a basis for planning
# 4 Identify feasible alternatives
• For complex issues, identify all feasible alternatives
(i.e. those likely to have some support)
• Do not jump to “right” answer for complex issues, it
is typically not that clear cut.
– Lack of depth of analysis if often cited as weakness.
• Include all alternatives presented in the case
# 5 Analyze the alternatives
• Analysis can be quantitative and / or
qualitative depending on type of issue
• Use case facts
• Consider appropriate authoritative guidance
(including both broad principles, and more
detailed guidance, such as specific criteria)
• … but don’t be generic
• Consider possible interrelationship of issues
# 6 Recommendations
• Make one!
• Recommendation should flow from:
– User’s needs
– Decision criteria
– Analysis
• Be selective in recommending “further analysis
needed” or “additional information needed” - often
you must make a recommendation based on the
information that you have
# 7 Implications
• Often, recommendations have implications for
contracts such as:
– Compensation agreements
– Purchase agreements
– Closeness to debt covenants
• Recalculate figures if contract is important
and information is available
# 8 Communication
• In communicating your recommendation:
– Remember your role, the requirements and user (watch
tone)
– Consider other implications of your recommendation:
financial statements effects, possible disclosure
considerations
• Overall:
– Be clear and organized
– use headings
– present a logical structure
– Carefully reference exhibits