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Target Corporation's Accounting Policy Analysis

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Accounting policy efficiency and reliability

Target Corporation’s accounting policy is both efficient and reliable. However, in relation to the ratios discussed earlier, the use of estimates accounting policy is one that may require additional attention. This policy requires management to make estimates and assumptions affecting reporting amounts in the consolidated financial statements which can link to the payout ratio, the return on assets ratio (ROA), and also the earnings per share ratio (EPS). By comparing the estimates, management makes in comparison to the actual numbers presented in the statement, it would support us to make reflections on numbers that look unusual. All three ratios connect to the assertion accuracy since their amount …show more content…

Also, material misstatement is possible if information gets lost in the technology system, whereas the chance of finding it may be low. In 2013 Target Corporation had a security breach with their credit card technology system which resulted in a loss of several million dollars. Moreover, an article from CNN Money stated that in a settlement Target Corporation agreed to pay $10,000 to its customers who were affected by the security breach (Riley).

Evaluation of Internal and Disclosure Controls

According to Target Corporation’s 10-K for 2015, the only changes to the internal controls was the continued implementation of enterprise resource planning software. No other changes were made for the most recent fiscal quarter which would materially affect the internal control over financing reporting.

Target Corporation has their responsibility to maintain a comprehensive system of internal controls to offer reasonable assurance. This is to ensure that assets are secured and that transactions are completed according to the correct procedures. In evaluating Target Corporation’s compliance with its responsibilities for the 2014 tax period, Ernst &Young found no misstatements. …show more content…

An investigation linked to the assertion accuracy will provide valuable information because the earnings per share amount is what provides payout to its stockholders. Accuracy relates to the amount of purchase transactions and their proper recording, which can be useful by comparing the invoices and prices with the purchase order and receiving reports (Louwers).

A testing to confirm events and their occurrence could be helpful. This would ensure that the events and transactions have actually occurred and are recorded in the financial statements accordingly. Sales discounts and returns and allowances are two types of events/transactions that are linked to the EPS value through its inclusion of net sales. Therefore, certifying that certain items have actually been returned and discounts were actually given can contribute to testing EPS for occurrence

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