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The first phase of the audit process is where the planning and designing of the audit process is developed which has eight sections. Planning is essential in helping the auditor to obtain sufficient and appropriate evidence at the lowest reasonable cost and to avoid misunderstandings with the client. The initial planning involved in the first phase of the audit process is comprised of the first four sections. The first section is to accept the client or continue providing services to an existing client and perform the initial audit planning. In 1965, KPMG LLC, was elected by Diebold, Incorporated Audit Committee to be their independent registered accounting firm. At which time, KPMG LLC did a new client investigation and learned in 1859 Carl "Charles" Diebold established Diebold Safe & Lock Company and located the business in Cincinnati, Ohio, USA. The company began their business by manufacturing safes and vaults for the banking industry. The company's headquarter for Diebold Safe & Lock Company was relocated to Green, Ohio, USA in 1872. Conversely, the address is recorded as being in North Canton, Ohio. Soon thereafter, the company became incorporated under Ohio State laws in August of 1876. Progressing forward into 1936, Diebold Safe & Lock Company diversified the company by purchasing businesses that focused in merchandising the rotary, index, and microfilming systems. In addition, the company branched out even farther and begun creating armor plates for military tanks in that same year. Diebold Safe & Lock Company was retitled to Diebold, Incorporated in 1943. Diebold first began trading stock publicly in the 1930s. However it wasn't until April 27, 1964, Diebold publicly traded company shares on the New York Stock Exchange with the trademark symbol 'DBD.' After obtaining the information, KPMG accepted Diebold, Incorporated as a client. At which time, an engagement letter would be exchanged between the companies to have a written agreement to outline the responsibilities of management and the auditors, describe the engagement's objectives and to disclose the limitations of the engagement. After which, KPMG will develop the audit strategy appropriate for the engagement.
During subsequent annual reviews performed by KPMG to decide to retain Diebold, Incorporated as a client, the following events of the company were part of what was evaluated with the financial statements in the consideration. Later in 1970, Diebold started to revitalize the company and began marketing security and surveillance systems that were computer ran. Also in the 1970s, the company began retailing numerous Automated Teller Machines also known as an ATM. Diebold entered the 21st century by broadening their horizons once again with acquiring Global Election Systems, an innovator in touch-screen technology, and joined in the election industry. However in 2003, Diebold's reputation was marred in the election industry due to unsatisfied reviews of the machines software and allegations of fraud. In the recent year, Diebold has made significant changes in their company. On August 20, 2012, Diebold, Incorporated's new Transfer Agent became Wells Fargo Shareowner Services. The shareholder records and investment information automatically transferred to Wells Fargo Shareowner Services. Subsequently, Diebold announced it had canceled plans to build a $100 million corporate headquarters in Green, Ohio. Thomas W. Swidarski, former President and Chief Executive, provided an explanation in a statement, "As we've been analyzing our near - long-term growth priorities, it has become clear that investing more than $100 million in a headquarters facility is not economically feasible given the other priorities for the business at this time." (Cho 2012). However, speculation indicates the 58 percent, $17.4 million, decline in the 3rd quarter 2012 earnings to be the material reason for the cancellation. Nevertheless, Diebold is persistent the decision was centered on investing in lucrative acquisitions. In the midst of a disconcerting downward spiral in earnings, Diebold's Thomas W. Swidarski, President and Chief Executive resigns on January 24th, 2013 after serving the company 17 years. Currently, Diebold has around 17,000 employees in approximately 90 countries worldwide. Additionally, KPMG LLC still maintains Diebold as a client.
The second section of the first phase of the audit process is to understand the client's business and industry. During this section, the auditor is responsible for attaining adequate knowledge of the business and the business's industry. The environment of the company is assessed along with the internal controls put in place to measure the risk of material misstatement of the company's financial statements. Throughout this section, the auditor will obtain evidence by touring the client's facilities and operations, identify related parties, evaluate the code of ethics, and obtain corporate minute notes. In addition, performance measurements are taken to compare ratio analysis information against the company's competitors.
The third section of the first phase of the audit process is to assess client business risk. The auditor utilizes information obtained in the two previous steps to assess the client business risk, the risk that the client will be unsuccessful in achieving its goals. KPMG primarily would focus on the probability of Diebold having material misstatement associated with assets and goodwill associated with merger transactions. Sarbanes Oxley Act of 2002 mandates management to certify that the company has guidelines for disclosure of material information pertaining to business risk.