Return to Target’s 2010 annual report. For instructions on how to access the report online, see the Continuing Financial Statement Analysis Problem in Chapter 2. Now, answer the following questions:
1. Look at Target’s latest audit opinion. It can be found on page 31 of Target’s 2010 annual report. Which CPA firm audits Target? Is their audit opinion unqualified, qualified, adverse, or a disclaimer?
2. What does the auditor’s opinion say about the accounting standards used by Target? What does the opinion say about how the audit was conducted? What does the audit opinion say about Target’s internal control?
3. Look at management’s statement on internal control found on page 32 of the financial statements, found in Target’s annual report. Look at the auditor’s statement on internal control found on that same page. What do these statements tell you?
4. Look at Target’s balance sheet as of January 29, 2011. Do Target’s financial statements reflect current or historical values? What is the value of stockholders’ equity reported on the latest balance sheet? On the same date as the latest financial statements, Target’s stock sold for approximately $50 per share for a total market value of approximately $35 billion. Why is there a difference?
5. Look over Target’s financial statements and footnotes. Look at your answers to questions 1 through 4 above. Now do you think Target’s financial statements are understandable, relevant, and reliable?