Analysis of Cisco System annual report

Analysis of Cisco System annual report

1. Cisco Systems (stock symbol: CSCO) uses PriceWaterhouseCoopers LLP as its independent accountants (Cisco Systems, 2000, p. 46).

2. According to PriceWaterhouseCoopers, the financial statements were prepared in accordance with generally accepted accounting principles as practiced in the USA, and the accountants believe that the company does not appear to have deliberately misrepresented its financial position (Cisco Systems, 2000, p. 46).

3. The external audit checks that the steps used to develop financial data issued by a company are valid and in keeping with standard accounting and control practices. External auditors look for irregularities in reporting practices to determine that the information on financial statements is fundamentally valid. The accuracy of the data is not considered by the auditors, only the procedures used to arrive at the data.

4. An auditor’s report stating that financial statements have been prepared in accordance with generally accepted accounting principles tells readers that the financial statements are probably an accurate representation of the company’s financial position. If an audit report states that there are irregularities, investors and creditors will immediately lose confidence in the company’s ability to continue as a viable operation.

For the corporation, an audit report that gives the opinion that the financial statements are an accurate representation of the business means that the company’s personnel can use those financial statements in their planning. More importantly, the external audit provides validity to the procedures that the company has in place internally, which supports the data gathering process in general (not just as it relates to the financial statements).

5. Cisco Systems, Inc. had an average of 7,438,000,000 diluted shares of common stock outstanding (Cisco Systems, 2000, p. 17). Diluted shares take into account those shares which are outstanding throug…

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