Audit Memorandum


University Affiliation

DoleFood Company, Inc. audit memorandum



Purpose: Todescribe the risks facing Dole Food Company, Inc. and their effect onthe financial statements. To analyze the assertions made bymanagement regarding the financial statements that might bemisstated. To describe controls that might be used to mitigate therisks and some of the substantive procedures that could be used toidentify whether misstatements exist.

Background: DoleFood Company, Inc. is an international agricultural corporation basedin America with headquarters in California. It is the largestproducer of vegetables and fruits in the world. It markets foods likepineapples, bananas, grapes, salads, strawberries, and other frozenand fresh juices and fruits. The Chairman initiated a nutritionaleducation and research foundation known as the Dole NutritionInstitute.

Issues: TheCompany has a significant amount of debt which might end up affectingits operations and ability to meet their maturing obligations. Someof the consequences on the financial statements include limitedability to borrow additional funds for capital expenditures, workingcapital, or make financing more costly(Reagan, 2012). Cash flow will bedirected from operations to the payment of debt hence reduce cashavailable to fund working capital. It might call for the sale ofassets not classified as held –for-sale to reduce the debt level.There will also be a restriction on their strategic acquisition ofbusiness opportunities.

Fluctuations in currency exchanges impact theresult of the company’s operations. Almost 200 of their productsare grown, sourced, processed, distributed, and marketed in over 100countries around the world. The sales are transacted in Europeancurrencies and U.S. dollars hence affected by fluctuations in thecurrency exchange rates in the selling and sourcing locations.Despite entering foreign currency exchange futures and forwardscontracts, the operational results will still be impacted by theexchange rates(Reagan, 2012). It estimates thata ten percent strengthening of the U.S. dollar in relation to theeuro lowers the operating income by nearly $15 million withouthedging. It will, therefore, affect the statement of operations.

Guidance:Some of the assertions made that could be misleading is the valuationassertion. It is because an asset for example cash can be valued at acertain amount as an account receivable but due to the risk offoreign exchange, variations its value might lower or rise hence thevalue in the financial statement would be incorrect(Reagan, 2012). Another assertionthat could mislead is the existence assertion for example of aparticular fruit or vegetable might be recorded in the financialstatement but due to crop diseases, pests, and poor weatherconditions it may fail and die hence fail to exist in reality but bepresent in the financial statement.

The auditor can use controls like theinspection to ascertain the assets in the statements exist on theground. They can also inquire from the creditors on the correctamount of debt the company owes them so as to determine their properlevel of indebtedness.

Some substantive procedures that might beapplied to check for any misstatement include confirmation ofaccounts receivable, confirmation of inventories not on site,confirming calculations on inventory valuation information, andanalytically analyzing assets.

Conclusion:Dole Food Company, Inc. is exposedto many risks such as high levels of indebtedness, and the effect offluctuations in currency exchange rates. The valuation and existenceassertions made by management could be misleading as the assets couldbe wrongly valued and never in existence on the site. Controls likeinspection and inquiries could be employed to ascertain theassertions made. Apart from this, substantive procedures likeinventory valuation to check for misstatements can be applied.


Reagan, J. (2012).&nbspQualityaudit in the fastener industry.[Washington, D.C.]: National Aeronautics and Space Administration.