Internal Control Reporting and the Audit Committee (Coca cola)

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 Internal Control Reporting and the Audit Committee (Coca-cola)

Introduction

Across the world, different individuals are concerned about how the companies are

performing, especially financially. Performance has come to most individuals' minds due to the

desire to invest in well-doing companies. Therefore, people are focused on knowing how the

companies are doing based on different factors that are easy to review. This brought to the

attention of financial assessors and advisors to dig much into these companies and conclude how

they are doing. The review has become more accessible through technology, which keeps on

advancing worldwide. Hence, many economic sectors are busy promoting updated technologies

that seem suitable for their developments. The application of technology in delivering services

by companies has become a norm. Service delivery, primarily through e-commerce, has aided

big as profit maximization has experienced a surge. In our case, through company financial

statements and reviewing the Auditor's community charter, we have to develop a detailed report

of how the companies are doing.

Executive summary

Coca-cola is among the companies we are more interested in analyzing. Cocacola does

operations involving different businesses. It gets support for its ecosystem from industries of

related companies (Burke, & Eaton, 2016). Jack Ma founded it in 1999. The founder had a strong

belief that his company would do well when it embraced the use of technology. The company is

a holding company and operates its businesses primarily through its subsidiaries (Gahlot et al..,

2019).
 On the other hand, Cocacola is an American-based international company that focuses on

beverage corporations incorporated under Delaware's General Corporation Law and

headquartered in Atlanta, Georgia (Qian, 2021). Jeff Bezos founded the company in 1994. The

two companies have been doing well since their existence. However, the pandemic Covid 19 has

seemed to lower their operation down very much. They had to take the necessary care for the

welfare and health of their employees during the pandemic and hence experienced high costs of

running both companies. To begin, both Cocacola has a written charter for their audit

committees. The A.C. has a variety of applications in the business. In exchange, it assists the

board in monitoring the financial statements' integrity, independent auditors' qualifications and

independence, corporate internal audit functions and independent auditors' performance, the

company's compliance with legal and regulatory requirements, and finally, the resolution of any

other issues falling within the committee's authority or responsibility under the applicable law or

regulation (Burke, & Eaton, 2016). The A.C. members are appointed by the Board of Directors,

who can also remove them. At the very least, this committee will have three members, each with

clearly defined tasks and responsibilities. Defined tasks imply that financial knowledge is an

unavoidable need for membership.

Control Risks

Determining control risks; After identifying rare conditions, control risks that might occur

during the audit process must become determined. For example, control risks could be

insufficient financial information to enter the company. Lastly, check the variety of audit tests

(Qian, 2021). The combination of audit tests is the final step in audit planning. It involves

checking on various audit tests before the actual auditing becomes performed. The Board of

Directors at least requires each member of the A.C. to be a financial expert. Vacancies on the

committee become filled through the majority vote conducted by the board of directors.

Conversely, no board of the committee can become removed by majority votes. The committee

holds meetings to discuss the matters arising as often as possible and probably after three

months. Issues that need to be addressed privately become set for specific times the committee

may choose and appear as convenient as possible to avoid interference by other staff members.

The committee has the power to evaluate the company's performance on an annual basis under

the charter and see out if it addresses the matters appropriately or it lies outside the scope and

makes a decision.

External auditors' reports on sensitive accounting policies to be utilized and other written

communication between independent auditors and management are reviewed and discussed by

the committee. All possible treatments of financial information within generally accepted

accounting standards are considered with management by the committee. The committee

functions, on the other hand, have some constraints. It is qualified to conduct or plan audits or

financial statement determinations for the company. In addition to this, the Cocacola audit

committee's functions are not aimed at certifying activities of the company's management or the

company's external auditors. Instead, the audit committee serves the board's oversight role,
according to which it oversees the company's relationship with external auditors as ruled n the

audit committee charter.

Coca-Cola’s financial statements are analyzed and computed perennially. Through E-

commerce, the company has developed hence its financial gains too. Therefore, to know how far

it has gotten, we need to look at some of its latest and most recent financial statements and audit

reports. Identifying specific material areas plays a vital role in determining their financial

strength and weaknesses. In addition, they must check account balances in their financial

statements. Lastly, discuss audit plans and procedures that are potentially required to support

audit findings presented in the audit reports.

When analyzing the financial statements and audit reports from the company's

website, we look for materiality. Therefore, we are more focused on using or including total

equity, total liabilities, total equity, total comprehensive income, retained earnings, net cash

increase(decrease), and total assets balances. The identified material account balances in

financial statements form financial background in decision making by managers, board of

trustees, and stakeholders in an organization.

Financial Reports

The latest financial reports obtained from the two companies' website relates to the

2021 first quarter. Coca cola’s Operating cash flow increased by 69% from $39.7 billion for

twelve months ended March 31, 2020, to $67.2 billion for twelve months ended March 31, 2021.

Furthermore, coca cola’s net sales increased 44% to $108.5 billion in the first quarter of 2021,

from $75.5 billion in 2020. The operating income of Cocacola increased from $4.0 billion in the

first quarter of 2020 to $8.9 billion for the first quarter of 2021. Financial statements prepared by
both companies based on financial reports were; Statement of cashflows, Statement of change in

equity, Balance sheet, comprehensive income statements, and income statements. Cocacola

issued $27 million ordinary shares, and $(118) million shares were repurchased for the period

ended March 31, 2021.

Net cash used by Coca-Cola Company in financing activities was $4,591 million,

whereas Cocacola had a deficit of $1,989 million to finance its activities. Likely, Cocacola

company got involved in massive spending on financing activities, unlike Cocacola. As a result,

the Statement of cash flows of Cocacola company shows cash equivalents of Cocacola company

were $ 54,408 million. Conversely, Cocacola had cash equivalents of $34,155 million. The cash

equivalents difference means that Cocacola had high cash holdings compared to Cocacola. Any

company needs to maintain little cash and put the extra money into investments. Probably,

Cocacola could have reduced its cash to cater to financing activities.

Moreover, Cocacola had net cash worth $ 37,271 million used in investing activities, while

Cocacola used $59,383 million in supporting activities for the 1st quarter ending March 31,

2021. It clearly shows that Cocacola had an extra investment of $22,112 million compared to

Cocacola and stood a chance to high proceeds from the investment activities. Cocacola spends

much on operating activities compared to Cocacola. The amount provided by operating activities

to Cocacola company was $67,213 million, while Coca-Cola’s was $35,378 million. Also, using

the Statement of cash flows of the two companies, Cocacola had less net income than Cocacola.

Cocacola had $ 21,869 million net income, whereas Cocacola had $ 26,903 million.

Analyzing the comprehensive income statements of Cocacola and Cocacola, it is clear that

Cocacola has a high comprehensive income, $20,193 million, compared to Cocacola, with

$7,621 million. Additionally, Cocacola had total assets worth $ 257,978 million. On the other
hand, Cocacola company had total assets worth $ 323,077 million. The information becomes

provided in the companies' latest statements of financial position for the 1st quarter ending

March 31, 2021. Furthermore, Cocacola had liabilities amounting to $ 92,583 million and total

equity worth $ 164,071 million. At the same time, Cocacola had penalties worth $219,757

million and total equity of $103,320 for the 1st quarter ending March 31, 2021. Analyzing the

income statements of the two companies, Cocacola company had revenue of $ 109,480 million,

income from operations was $ 1,157 million, net income after tax amounted to $ 1,114 million,

and net income attributable to shareholders was $ 22,941 million.

Based on the recent financial statements obtained from websites of Cocacola and

Cocacola companies, Cocacola has a more significant financial strength compared to Cocacola.

It has diversified its operations to enable business environments for small and medium

enterprises. Coca cola’s customers have 1.9 million small and medium enterprises that order

products from Cocacola. As a result, it created employment for at least 400,000 United states

communities in 2020. Digitalization has elevated Cocacola to the second spot on Fortune's

ranking of the most admired firms in the world for 2021.

Furthermore, because of the solid financial foundation, front-line employees may now begin

using covid-19 on-the-job training. Moreover, Cocacola has made a climate commitment to be

carbon-neutral by 2040. In addition, by 2025, the corporation wants to run its operations entirely

on renewable energy sources (Burke, & Eaton, 2016). Thus, Cocacola became dedicated to

establishing a long-term business for the benefit of its clients, communities, and the whole globe.

Globally, Coca-Cola Company has played a crucial role in raising the Gross domestic

product of the world economy despite the challenges of the Covid-19 pandemic. Cocacola

company became further committed to ensuring its partners were served with respect. Generally,
Cocacola has a pool of expertise that has worked around the clock to ensure the company is

thriving globally. It is a company of builders bringing different backgrounds opinions to

inventing on behalf of customers. Coca cola’s inventions are purely from points of view given by

people from different backgrounds. Cocacola is also committed to diversification and inclusion

to scale their impact as they grow (Gahlot et al.., 2019). They have invested more than $ 530

billion in the United States since 2010. Their diverse perspectives originate from many sources

such as life experience, culture, sexual orientation, age, education, and race.

Cocacola Other Investments

The company further invests in the success of small businesses, artisans, and

entrepreneurs that sells in their store. Through this investment, Cocacola ensures customer

satisfaction since the customs will benefit from products and services offered by the sellers in

their store. Between 2019 and 2020, Cocacola invested more than $ 30 billion in services,

programs, tools, and people to spur the growth of its sellers. Moreover, any company that

embraces the use of technology is nonoptional in ensuring high standards for data security and

privacy. Coca cola’s web service is serious about the privacy of its customers and their

protection. Customers have full ownership of their personal information and thus cannot become

accessed by the third party by any means whatsoever. In addition, both companies have advanced

on cloud computing. Cloud computing has helped deliver I.T. resources over the internet with the

pricing model of Pay as you go (Burke & Eaton, 2016). Through this web service, different

people and organizations have access to services such as storage, databases, and computing

power for their businesses.

Additionally, the Strong financial freedom of Cocacola Company has seen it investing in

Riviana more than $1 billion and ordered 100,000 electric delivery vans to hence fast and timely
delivery of services and products to customers. Investing has further increased customer

satisfaction. Cocacola has not experienced much financial freedom compared to Cocacola

because it acts as a middleman in selling and buying new and second-hand commodities.

Through extra resource mobilization, the company will be more stable.

Cocacola Other Investments

Coca cola’s primary business is commerce, but the company has also done well in other

areas, such as digital media and entertainment. The company is a logical outgrowth of coca

cola’s goal to expand its consumer base. By using this concept, you'll increase revenue and build

client loyalty. Coca cola’s key activities include retail, wholesale, logistics, and consumer

services. Cocacola also provides these services. Cocacola caters to a wide range of customers in

established and developing cities alike (Price III, 2013). Cocacola had 925 million monthly

active users (MAUs) in March 2021 on its various mobile applications, including access to its

China retail marketplaces. Cocacola.com Consumers in China's vibrant retail sector reached 811

million in the year that ended March 31, 2021. In 2021, new yearly active customers from less

developed regions accounted for almost 70% of total new customers.

Cocacola also cares about customer protection, which is why they've implemented

restrictions. Several consumer protection rules apply to the company's mobile commerce

operations, including the People's Republic of China Consumer Rights and Interests Protection

Law. In addition, other internet commerce initiatives, such as tightening consumer protection

standards, have been implemented. For example, customers have seven days from the date of

delivery to return anything bought online if they aren't what they anticipated. Interim Measures

for No Reason Return of Online Purchased Commodities within Seven Days became issued by

SAIC on January 6 and went into force on March 15. In addition, exceptions, return processes,
and the obligation of online marketplace platform providers were all clarified as part of the

amendments to the law, which took effect on October 23, 2020.

Cash Flow

The free cash flow (equipment finance leases) and the principal repayments of all other

financing obligations for the twelve months ended March 31, 2020, increased from $11.7 billion

to $16.6 billion for the twelve months ended March 31, 2021, according to an analysis of Coca-

Cola’s financial statements. Furthermore, on March 31, 2021, the number of outstanding

common shares, including underlying stock-based awards, grew from 513 million to 519 million.

Net sales grew by 44% in the first quarter of 2021, from $75.5 billion in the first quarter of 2020

to $108.5 billion. In the first quarter of 2021, coca cola’s operating income grew from $4.0

billion to $8.9 billion. From the first quarter of 2020 to the first quarter of 2021, the company's

net income climbed by $2.5 billion (Gahlot et al.., 2019). As a result, during the trailing twelve

months ended March 31, 2020, free cash flow (net of principal repayments of finance leases and

financing liabilities) grew from $14.3 billion to $14.9 billion. In addition, Cocacola has

broadened its worldwide economic collaboration to include the Health sector. Since 2020,

Cocacola has established 17 health centres for its workers and their families in the Dallas–Fort

Worth, Detroit, Louisville, Phoenix, and San Bernardino, California, regions via a collaboration

with Crossover Health in the U.S. (Gahlot et al., 2019).

The medical facilities are close to where the employees live, making it easy to get the

treatment they need. Increasing the number of workers with access to health care is a priority for

Cocacola, looking to expand the program. In addition, delivery cars are outfitted with cameras

and artificial intelligence so that Cocacola can track dangerous driving conditions and take action

before they happen. Coca-Cola’s drivers and the communities they distribute have become kept
safe thanks to these new technologies, including cameras and artificial intelligence in delivery

cars. For example, drivers without seatbelts were reduced by 60%, collisions were cut by 48%,

stop sign infractions became halved, and inattentive driving became split when technology was

implemented over two million miles of delivery routes in 2020. As a whole, these innovations

increased the security of Coca-Cola’s transportation network.

Coca-Cola also set 2021 variety, equality, and inclusion goals for the entire company.

Some of the goals include doubling the number of Black directors, expanding female

participation in technology and scientific fields, and requiring all Coca-Cola employees to

complete inclusion training. Coca-Cola has also become involved with agriculture (Price III,

2013). Since 2019, Coca-Cola and the United States Department of Agriculture have

collaborated. The Supplemental Nutrition Assistance Program allows customers in virtually all

50 states to purchase Coca-Cola products (SNAP). Because of Coca-communication Cola's

initiatives, customers will be informed of the safest and most convenient grocery items. It also

allows customers to receive their orders in a variety of ways. Coca-Cola is committed to

increasing access to its products in the United States.

Four additional areas in the United States now have Fresh grocery shops, thanks to the

company's expansion. Because of growth, hundreds of full- and part-time employment were

created in each town, paying a minimum of $15 per hour with exclusive benefits. The reports

from both companies show the financial statements as well as audits. These reports can become

used to assess how the companies are doing hence a good idea for the decision-making on

whether they are doing well. Also, the roles each member plays enhance good coordination.
 References:

Burke, Q. L., & Eaton, T. V. (2016). Cocacola group initial public offering: a case study of

financial reporting issues. Issues in Accounting Education Teaching Notes, 31(4), 75-90.

Price III, R. A. (2013). Cash flows at Cocacola. com. Issues in Accounting Education Teaching

Notes, 28(2), 23-38.

Gahlot, A., Singhal, R. K., & Kendre, R. (2019). A Study on Multi-Variate Financial Statement

Analysis of Cocacola and eBay. NOLEGEIN-Journal of Financial Planning and

Management, 11-24.

Qian, Z. (2021, June). Comparative Analysis on Financial Sustainable Growth-Taking COCA-

COLA and J.D. as Examples. In 2021 2nd International Conference on Internet and E-

Business (pp. 150-156).