Accounting Capstone Written Project

S t u d e n t I D 0 0 0 2 9 8 6 8 4 Z h e g i n a A c c o u n t i n g B u s i n e s s P l a n P a g e | 1
Auspicious Auditors
Yuliya Zhegina
Partner
1178 Broadway, Suite 3425
Manhattan, NY 10023
(212) 987-5432
PYZAA@auspiciousauditors.com
January 1, 2015

A. Executive Summary…............................................................................................................... 4
A1. Business Identification…............................................................................................. 4
A2. Mission, Goals and Objectives…................................................................................. 4
A3. Keys to Success…........................................................................................................ 4
B. Company Summary…................................................................................................................ 6
B1. Industry History…........................................................................................................ 6
B2. Legal Form of Ownership…........................................................................................ 7
B3. Location and Facilities…............................................................................................. 7
B4: Management Structure…............................................................................................. 9
B5. Products and Service…................................................................................................ 9
C. Market Analysis…................................................................................................................... 11
C1: Target Market…......................................................................................................... 11
C2: Industry Analysis…....................................................................................................12
C3: SWOT Analysis…..................................................................................................... 12
C4: Competitive Analysis................................................................................................. 14
D. Market Strategy….................................................................................................................... 17
D1: 4Ps….......................................................................................................................... 17
D2: Price List…................................................................................................................ 18
D3: Selling Strategy…...................................................................................................... 18
D4: Sales Forecast…......................................................................................................... 19
E. Implementation Strategy…...................................................................................................... 21
E1. Overall Strategy…...................................................................................................... 21
E2. Implementation…....................................................................................................... 22
F. Financial Statements and Projections…................................................................................... 23

F1. Forecasted Profit and Loss Statement…..................................................................... 23
F2. Forecasted Balance Sheet…....................................................................................... 23
G1. Financial Report…................................................................................................................. 24
G1. Financial Projections.…............................................................................................. 24
G2. Financial Position…................................................................................................... 25
G3. Capital/Investment Needs…...................................................................................... 25
References…................................................................................................................................. 27

A. Executive Summary
A1. Company Identification: The name of the company is Auspicious Auditors. It is
located at 1178 Broadway, Suite 3425 in Manhattan, New York.
A2. Mission of the Company: The mission of Auspicious Auditors is to help small
businesses grow by auditing their financial statements so these companies are able to get
approved for a loan which they would use for business expansion.
A3. Business Goals: The two goals Auspicious Auditors wishes to achieve are:
1. A positive net profit for the first year of operation. This company believes in helping
others and is not in it just for the money. Simply reaching a positive net profit after the
first year of operation is a step in the right direction.
2. Reach 100% customer satisfaction by the end of the first year of operation. While it is
important to market to receive new customers, it is even more important to keep current
customers. If a company has a sufficient number of loyal customers, it would not have to
spend as much, if any, money on advertising.
A4. Keys to Success: The following describes three keys to success for the company:
1. Keeping detailed records of all transactions will ensure that all company money is
accounted for. This will greatly help with the first business goal. Knowing what money is
being spent on and how much money is coming in will give the company knowledge on
how to better control said money and reach a positive net profit for the first year of
operation.
2. Asking customers to fill out surveys will show the customer that their opinion is of high
value to the company. This is key to reaching a 100% customer satisfaction. Having
loyal customers is monetarily beneficial to the company.

3. Frequent communication with employees will make them feel valued. Happy employees
will provide better service to customers and happy customers will want to keep doing
business with the company. Consistent meetings are one way to let employees be heard
and offer ways to improve the company. Team building activities are also a way for
employees to feel more connected to each other and the company.

B. Company Summary
B1. Industry History: Auditing has been around for a long time and it has evolved over
many years. During the Industrial Revolution, when business activity increased greatly, auditing
methods were first adopted. It was important for companies to be able to detect fraud and be
accountable for their finances (Byrnes, 2012).
However, after the stock market crash of 1929, auditing became even more important as
Congress created the Securities and Exchange Commission. The SEC had broad authority over
all aspects of the securities industry. This included overseeing auditing.
Publicly traded U.S. companies had a responsibility, bestowed by the SEC, to submit
various periodic reports to them. Public accounting firms would assist companies and provide
assurances regarding the reports. It is important to note: at that time the information given by
management to the public accounting firm was easily relied upon. After the McKesson &
Robbins incident of 1939, when fraudulent activities were discovered, auditors were required to
inspect inventories and confirm receivables. Before that, physical inspection of inventory was
optional.
In the 1950s, automated accounting systems began to appear. However, auditors
continued to use the manual method until at least the 1960s. In the 1970s, there were two events
that resulted in more change to auditing. One was the Equity Funding Corporation scandal of
1973. During this scandal a computer system was dedicated solely to create false insurance
policies. This falsely inflated profits and stock price went up. The result of this scandal was the
creation of EDP (electronic data processing) specialists, by large companies, who were
responsible for auditing information systems. The second event was the Foreign Corrupt
Practices Act (FCPA) of 1977. This act forbade American companies from bribing foreign

officials to receive their business. The act also made it a requirement for firms to implement
ways to be able to track such activities.
In 2002, the Sarbanes-Oxley Act (SOX) made great changes to publicly traded
companies and in turn, auditing. It was a response to major accounting scandals including
companies Enron and WorldCom. SOX made it clear that financial reporting and internal control
practices were the responsibility of both the auditors and management. Harsher penalties were
implemented if the law was not complied with and tighter regulations were set in place.
To recap, auditing methods were adopted many years ago. Over time, they evolved. The
numerous business related events that happened between the Industrial Revolution and present
day have shaped auditing into what it is today.
B2. Legal Form of Ownership: Auspicious Auditors is a limited liability partnership
licensed to do business in the state of New York. A limited liability partnership consists of two
or more people. The term limited liability means that if one partner is negligent, the other partner
is not held accountable for it. The three partners of Auspicious Auditors are Yuliya Zhegina,
Andrew Blakley, and Daniel Blakley. Each partner owns thirty three and one third percent of
company shares.
B3. Location and Facilities: The facility of Auspicious Auditors is located at 1178
Broadway Suite 3425, Manhattan, New York. Located in the heart of New York where there are
many prospective clients, Auspicious Auditors is situated near the N and R subway lines. This
makes it convenient and efficient to get around the city to various clients and for clients to come
to the office. There is also public parking down the street for those who prefer to commute by
car. The size of the office is 1100 square feet. It includes a reception area, a conference room,

three offices, and a staff area. All three partners are licensed as CPAs in the state of New York.
A photo of the street view of the building is shown below.

Partner
B4. Management Structure: Each of the three partners will be responsible for providing
auditing services to clients. They will focus on financial auditing with a possibility to branch off
into information technology, compliance, and operational auditing in the future. The main
responsibility of a financial auditor is to form an opinion regarding whether the financial
statements of a company are free from error or not. Alongside the auditors there will also be a
receptionist at the office. The responsibilities of the receptionist will be to greet visitors,
distribute mail, order office supplies, file documents, make photocopies, and send and receive
faxes. No major increases in personnel are expected to happen in the next year.
Partner Partner
Receptionist
B5. Products and Service: Audacious Auditors will provide financial auditing service to their
clients. More specifically, financial auditing will entail the following:
1. Gathering information from management and others to understand the company that is
being audited. For example, asking about the company’s operations, financial reporting,
and whether anyone knows about any fraud or error.
2. Assessing the internal control system.

S t u d e n t I D 0 0 0 2 9 8 6 8 4 Z h e g i n a A c c o u n t i n g B u s i n e s s P l a n P a g e |
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3. Observing physical inventory count.
4. Confirming various accounts with a third party.
5. Analyzing variances in account balances and/or transactions.
6. Testing documents related to account balances and/or transactions (Kovacs, 2015).
In the future it is possible that Audacious Auditors will offer more than just financial auditing
service. Some examples are:
1. Compliance auditing
2. Operational auditing
3. Information technology auditing
4. Tax preparation
5. Tax software

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C. Market Analysis
C1. Target Market: A target market is a specific group of consumers at which a product
or service is projected toward. Some examples of target markets are individuals, small
businesses, medium businesses, and large businesses. For Auspicious Auditors, targeting small
businesses would be ideal to begin with. The main service that Auspicious Auditors will offer in
the beginning is financial auditing. It is unlikely that individuals would require financial auditing
service. Medium and large companies may prove to be too challenging. So small businesses are
the perfect target market.
According to the SBA (2014), “"a small business" is defined either in terms of the
average number of employees over the past 12 months, or average annual receipts over the past
three years.” For example, a company with 200 or less employees in the new car dealer retail
trade would be considered a small company. Manhattan is a highly populated urban area where
there are many small businesses. In addition, there are four other boroughs around Manhattan,
within commuting distance, which are also dense with people and small businesses. These other
four boroughs are Brooklyn, Queens, The Bronx, and Staten Island. Potential customers can be
reached in a variety of ways. Social media, business cards, subway advertisements, and word of
mouth are just some examples.
To be more specific, Auspicious Auditors will be targeting small restaurant businesses.
Manhattan is filled with places to eat on every corner. Those are all potential customers. The
ideal owners of these businesses would be sole proprietors and partners. Given that Auspicious
Auditors is a partnership that consists of only four employees, dealing with sole proprietors and
partners makes the most sense. A challenge in this would be to get business from such a specific
market. However, good research and efficient marketing will make this possible.

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C2. Industry Analysis: It has been said that accountants will always be in demand. While
this is partially true, the 2008 financial crisis did have a negative effect on the accounting
industry as well as many other industries. During this time even the revenue of the largest
accounting firms declined. However, the 2008 financial crisis happened seven years ago and the
economy has been improving.
Some industries are seeing more activity than others (Duffy, 2013). For example,
restaurants are now getting more business than they were closer to 2008. For accountants, this
means that perhaps they should be aiming their services toward those industries which are
experiencing most activity. Real estate is another industry which has improved greatly since
2008.
According to Statista (2015), “the revenue of the accounting industry was approximately
137 billion U.S. dollars in 2013.” In 2018, this number is expected to reach 160 billion. In 2013
there were 1.17 million accountants and auditors employed in the U.S. In 2022 this number is
expected to rise to 3.44 million.
C3. SWOT Analysis:
S (Strengths)
1. Business is located in the heart of
Manhattan.
2. The three partners are well educated
and have CPA licenses.
3. Overhead is low.
W (Weaknesses)
1. Business lacks marketing expertise.
2. Total of four employees.
3. Only current service is auditing.
O (Opportunities)
1. Business is part of a growing industry.
T (Threats)
1. Potential competition.

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2. Starting as a small company leaves a lot
of room for growth.
3. Amount of small businesses is
increasing.
2. Theft of company information.
3. Theft of company property.
Strengths:
1. Auspicious Auditors is located in the heart of Manhattan. This makes it convenient to
travel to clients and for clients to come to the office, if needed. Surrounding
Manhattan are four boroughs which are also easy to get to if clients are located there.
2. The three partners of Auspicious Auditors have gone through rigorous schooling for
accounting. They possess CPA licenses and are knowledgeable in their field.
3. Starting an auditing company requires fairly low overhead since the company will be
providing a service as opposed to creating a product. The office rent and employee
compensation will be the most significant expense.
Weaknesses:
1. No one in the company went to school for marketing so no one is an expert in that
field. It might be challenging to market the business.
2. There are a total of four employees in the company: three partners and one
receptionist. This could prove to be challenging if the company ends up with more
clients than the current work force could handle.
3. The only service the company currently provides is auditing. This may limit the
amount of clients the company receives. However, since the company’s work force is
small, this may not be a bad thing.

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Opportunities:
1. Accounting (and auditing) is a growing field. Referring back to a previous section,
the revenue of accounting and the number of accountants and auditors is forecasted to
increase to 160 billion U.S. dollars and 3.44 million people, respectively.
2. Starting as a small company leaves a lot of room for growth. Even if the company
will remain “small”, they could still offer more services and hire several more
employees.
3. The population in Manhattan is increasing. Therefore, there will be more businesses
to cater to a growing population. Those businesses will still need to be audited
financially.
Threats:
1. It is possible that there will be other auditing companies or accounting companies that
offer auditing service. However, this can be countered with better marketing and
targeting the service toward a more niche market.
2. In today’s world many businesses keep sensitive information on a computer for easier
storage. However, this can be accessed by the wrong people. One way to prevent that
is to password protect all computers.
3. Physical theft of property is a threat, especially in a high population city like
Manhattan. A couple of ways to deter theft is to bolt down computers and lock
expensive items away before leaving the office.
C4. Competitive Analysis: One potential competitor for the company is Matthews & Co,
LLP. They are located at 270 Madison Avenue, New York, NY and as seen on their website,
they offer a broad range of services. Below is a competitive analysis using Porter’s Five Forces.

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1. Threat of new entry:
 Amount of capital required to start a small accounting company is small.
 Retaliation is possible from existing companies if they feel threatened by new
companies.
 To offer accounting services, one needs to have a CPA license which takes
time to obtain.
 The biggest companies are the Big Four but they cater to large companies.
 As an example, if two companies offer financial auditing services, they are
going to be the same service. In that sense, there is no differentiation between
services.
2. Supplier power:
 Moderate number of suppliers.
 Few suppliers are large (the Big Four) and the rest are smaller.
 Suppliers do not pose threat of forward integration.
3. Buyer power:
 There are many buyers.
 Most of the buyers are companies of all sizes.
 Buyers do not threaten backward integration.
4. Threat of substitutes:
 There are no substitutes for financial auditing.
5. Competitive rivalry:
 Moderate number of competitors

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 If a small accounting company decides to leave the industry it would not incur
huge losses.
 Size of competing companies vary.

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D. Market Analysis
D1. 4Ps: Below is a chart of the four Ps of marketing which are product, price, place, and
promotion.
Product
*Financial auditing service is aimed toward
small businesses located in the NYC area
including Manhattan, Brooklyn, Queens,
Staten Island, and the Bronx.
*Service is provided by polite, professional,
and educated CPAs.
Price
*The price will vary depending on the
complexity of the audit.
*Generally, larger companies will require a
more complex audit. Therefore the price will
be higher for larger companies.
Place
*Customers will have a choice of how to
receive the product, which is a financial
audit report. The choice is either by parcel or
e-mail. If sent by parcel, UPS will be used.
If sent by e-mail, the report will be
encrypted to ensure privacy.
Promotion
*Advertisments can be placed inside train
cars since many people use the subway to
commute.
*The company will have a website and
participate in social media such as Twitter.
Target
Market

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D2. Price List: Below is the price list for Auspicious Auditor’s service.
Type of Audit Size of Company (number of employees)
0-99 100-199 200-299 300-399 400-500
Full Statutory
Audit
$15,000 $16,000 $17,000 $18,000 $19,000
Attestation $10,000 $11,000 $12,000 $13,000 $14,000
Financial
Statement
Review
$5,000 $6,000 $7,000 $8,000 $9,000
For clarification, a short description of each service is as follows.
 A full statutory audit is a thorough verification of a company’s financial information.
Only CPAs are allowed to do this type of audit.
 Attestation also provides verification of a company’s financial information but it is not as
thorough as a full statutory audit. Hence, attestation service does not cost as much.
 A financial statement review does not require the auditor to get an understanding of a
company’s internal control or to assess fraud risk unlike a full statutory audit.
D3. Promotional Strategy: On 05/04/15, the receptionist will launch the company
website. Potential customers who are searching for auditing service on a search engine, like
Google, will be able to find Auspicious Auditors and the service they offer. On 05/06/15, Dan
Blakley, one of the partners, will sign up on various social media. For example, he will create a
company account on Twitter and purchase a promotion where every Twitter user will be able to
see an advertisement for the service of Auspicious Auditors. On 05/11/15, Yuliya Zhegina will

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call the MTA (Metropolitan Transportation Authority) and inquire about paid announcements in
the train cars. When people commute by train, they will be able to see advertisements for
Auspicious Auditors, their services, and their contact information. Finally, on 05/18/15 Andrew
Blakley will call the Wall Street Journal and place an ad in their newspaper. The Wall Street
Journal is a newspaper that emphasizes business and economic news. If a sole proprietor or a
partner (the type of small business owner the company is targeting) were to read a newspaper, it
would most likely be this one.
Target Date Tasks Responsible Party
05/04/15 1. Launch website Receptionist
05/06/15 2. Join various social
media and spread the
word
Partner (Dan Blakley)
05/11/15 3. Place ads in train cars Partner (Yuliya Zhegina)
05/18/15 4. Place ad in newspaper Partner (Andrew Blakley)
D4. Sales Forecast: Below is the sales forecast for the first year of operation in chart
form. The company will open in May and probably not receive many customers right away. The
most profitable months will be January, February, March, and April. The reason is because the
end of the fiscal year is December 31st for most companies. In January and February the
companies will most likely be gathering and completing their financial data from the previous
year. Consequently, March will be the most profitable month since that is when companies will
have most likely finished compiling their data and requiring auditing services.

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May June July Aug Sept Oct Nov Dec Jan Feb March April
Monthly
Sales
Forecast
20K 15K 14K 13K 12K 12K 10K 10K 30K 40K 35K 30K

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E. Implementation Strategy
Implementation strategy is an important step for a company’s success. It is when
company plans are put into action to achieve various goals. With an implementation strategy, it
is easier for company plans to get enacted.
E1. Overall Strategy: Below is a table showing goals for implementation and their target
dates (Laurence, 2014).
Goals for Implementation Target Date
Register business name January 5, 2015
Prepare organizational paperwork January 12, 2015
Obtain business license January 19, 2015
Set up business location January 26, 2015
Purchase business computer January 28, 2015
Establish telecommunications January 30, 2015
Purchase furniture February 2, 2015
Purchase accounting software designed for a
small business
February 9, 2015
Open business checking account February 16, 2015
Work on website February 16 – April 1, 2015
Create e-mail February 16, 2015
Interview and hire a receptionist February 23, 2015
Obtain insurance for employees March 2, 2015
Develop advertising campaign March 9, 2015

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E2. Monitoring Plan: To evaluate the success of the company post-launch, the three
partners have come up with the following monitoring plan presented in table format:
Monitoring Activity Due Date/Frequency Responsible Party
 Track the number of new
customers acquired
Monthly Daniel Blakley
 Figure out total and monthly
revenue per customer
Monthly Yuliya Zhegina
 Track cost of acquisition for each
new customer based on advertising
Monthly Andrew Blakley
 Provide employee reviews, asking
each for feedback about what the
company could be doing better
Quarterly Andrew Blakley
 Survey customers to inquire about
their satisfaction with the service
given to them and their contact
person
 Track repeat business for existing
customers
Quarterly Daniel Blakley
 Track total revenue and see if the
company is on par with predicted
outcomes
 Track which service is most
popular and advertise it more
Annually Andrew Blakley

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F. Financial Statements and Projections
F1. Forecasted Profit and Loss Statement: Please see Page 1 of the Excel attachment.
F2. Forecasted Balance Sheet: Please see Page 2 of the Excel attachment.

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G. Financial Report
G1. Financial Projections: Looking at the financial statement in part F, the revenue for
Month 1 is $20,000. The operating expenses for Month 1 are from marketing and advertising,
employee health insurance, office rent, electricity, telephone and internet, salaries, travel, and
office supplies. These amount to $15,300 in the first month leaving a net profit of $4,700. In
month 2, the revenue is $15,000 and the expenses are $14,200. In month 2 there are no expenses
for marketing and advertising. The office supplies expenses also vary from month to month. The
net profit for month 2 is $800. In month 3, the revenue is $14,000 while the expenses are
$14,150. Month 3 has a net loss of $150. In month 4, the revenue is $13,000. Month 4 has a
marketing and advertising expense again, bringing the total expenses for the month to $15,250.
This equates to a net profit loss of $2,250 for month 4. In month 5, the revenue is $12,000 and
the expenses are $14,150. There is a net loss of $2,150 for month 5. In month 6, the revenue is
also $12,000 and the expenses are also $14,150 which again equates to a net loss of $2,150 for
the month.
Month 7 shows a revenue of $10,000 and an expense of $15,120 which totals to a net loss
of $5,120 for the month. Month 8 also shows a revenue of $10,000 and an expense of $14,120.
That equates to a net loss of $4,120 for the month. Month 9 shows a profit of $30,000 and an
expense of $14,125 which finally equates to a net profit of $15,875. Month 10 is also a profitable
month because the revenue is $40,000 and the expenses are $15,150. This means month 10 made
a net profit of $24,850. Month 11 has a revenue of $35,000 and expenses of $14,125. This equals
a net profit of $20,875. Finally, month 12 has a revenue of $30,000 and expenses of $14,200
which makes a net profit of $15,800.

25
One assumption that was used while making the financial statement in part F is that
audits happen most frequently at the beginning of the year. If a company wanted to get a loan,
they would need to present their audited financial statements representing a year of data to the
bank. Since the fiscal year of most companies ends on December 31, the companies would
gather their paperwork and most likely schedule an audit for January, February, March, or April.
With this information in mind, it makes sense that the revenue would be highest in
January, February, March, and April. During the months of July, August, September, October,
November, and December it is realistic to assume the company will experience a net loss,
especially because this is only the first year of operation. In future years, however, the company
will get more clients and no longer experience a net loss even in the slow months of business.
G2. Financial Position: At the end of the first year, the company is expected to earn a net
income of $66,960. The invested equity at the end of the first year is $7,000. This is the furniture
and equipment that the three partners purchased using money from their savings accounts,
family, and friends. When the invested capital is combined with the retained earnings, the
owner’s equity and total assets equate to $73,960.
G3. Estimated Capital/Investment Needs: When the company first opens for business, the
three partners will use money from their savings accounts for all the necessary steps to get
started. In addition, they will receive some monetary support from their family members and
friends. This money amount totals to $7,000, which can be found on the balance sheet under
fixed assets and invested capital. Therefore, no loan is required at this stage in the company.
In the future, when the company has a stable client base, it is possible that more CPAs
will be hired. More employees would require a larger office. If the company does not have
enough money in their bank account to rent a larger office, a loan will need to be taken out. An

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office with 2200 square feet will cost $6,000 per month which equates to $72,000 per year. The
actual loan amount will depend on how much money the company has when it decides to change
from the current office to a bigger one.

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References
Byrnes, P., Al-Awadhi, A., Gullvist, B., Brown-Liburd, H., Teeter, R., Warren, J., Vasarhelyi,
M. (2012, November). Evolution of Auditing: From the Traditional Approach to the
Future Audit. Retrieved from
http://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/downloadabledocument
s/whitepaper_evolution-of-auditing.pdf
Duffy, H. (2013, September 4). Accounting Firms Showing Signs of Economic Growth.
Retrieved from http://www.accountingweb.com/article/accounting-firms-showing-signs-
economic-growth/222347
Kovacs, J. (2015). What an Auditor Does and Doesn’t Do. Retrieved from
http://www.grfcpa.com/resources/publications/auditor-responsibilities/
Laurence, B. (2014). Start Your Own Business: 50 Things You’ll Need to Do. Retrieved from
http://www.nolo.com/legal-encyclopedia/start-own-business-50-things-30077.html
SBA. (2014, July 14). Summary of Size Standards by Industry Sector. Retrieved from
https://www.sba.gov/content/summary-size-standards-industry-sector

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Statista. (2015). Statistics and Facts on the Accounting Industry in the U.S. Retrieved from
http://www.statista.com/topics/2121/accounting-industry-in-the-us/

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