Thursday, May 23, 2019

Coca Cola Auditing Project

AIM 6334 inspecting and Assurance Service Research Project pic Li-chung Lee Kung Ya Cheng Jui-Ping Lin duck of Contents I. Introduction. P. 34 II. Ch 1 The leaf node acceptance/continuation process, including establishing an fellow feeling with the clientP. 45 III. Ch2 Obtaining an understanding of the entity and its environment, including infixed avow. P. 56 IV. Ch3 Preliminary Engagement Activities P. 6 V. Ch4 Assess take a chance and Establish corporality.. P. 78 VI.Ch5 Consider Internal reserveP. 911 VII. Ch6 Plan the take stock.. P. 1114 VIII. Ch7 Complete the Audit.. P. 15 IX. Ch8 Evaluate results and issue an audit bailiwick. P. 16 X. ReferenceP. 17 XI. Attachments.. P. 1823 I. Introduction The Coca- poop social club (Symbol KO) was incorporated in September 1919 under the laws of the State of Delaware and succeeded to the business of a Georgia corporation with the same name that had been organized in 1892.The caller is the manufacturer, distri stillor and marke tplaceer of nonalcoholic beverage concentrates and syrups in the world. Finished beverage products bearing its trademarks, change in the United States since 1886, are this instant sold in more than 200 countries. Along with Coca-Cola, the fri differenceship markets nonalcoholic sparkling brands, including Diet Coke, Fanta and Sprite. It manufacture beverage concentrates and syrups, which the fel crushedship sells to bottling and canning operations, barrage wholesalers and near fountain retailers, as well as finished beverages, which the ships company sells to distributors.The Company owns or licenses more than 450 brands, including diet and light beverages, waters, enhanced waters, juices and juice drinks, teas, coffees, and energy and sports drinks. The Company is iodin of numerous competitors in the commercial beverages market. Of the approximately 53 billion beverage servings of all types consumed worldwide every day, beverages bearing trademarks owned by or licenced to the Company broadsheet for approximately 1. 5 billion. 1The reason we chose this company is because it has enormous market share in countries around the world.In order to expand its market share, The Coca-Cola Company cooperated with the major fast food chain company. Today, The Coca-Cola Company be get down a well known and globalization company. We want to know how it can be sustainability and venerability company in the world. From its discoers, we also found out it has trem give the sackous benefit from its advertising. In this paper, we concern that how the hearers build a good audit plan in such large company and such complex business. II. Ch1 Understanding of the client There are five major reasons that we consider to accept The Coca Cola Company to be out client. 2 Management Integrity Based upon assertions of management ranging from the existence of an element in the financial statements to disclo certainlys of information regarding that element, we examines The Coca Col a Company financial statements that are no responsible practitioner would knowingly place reliance on assertions of a clients management which had questionable integrity. Relationships with Other Professionals We exit exist the GAAS requirement to communicate with the predecessor auditor prior to committing to provide audit services to The Coca Cola Company.Matters of interest include the opinions issued by the predecessor auditor, re point outation of the prior auditor or the refusal to stand for reelection, disagreements between the prior auditor and management regarding write up principles or auditing performances and any opinion shopping issues. Inquiry of other professionals having dealings with the client should, however, not be limited to the predecessor auditors. Furthermore, we will ask bankers, lawyers, and other professionals can provide important valuable information rough The Coca Cola Company and its management.Risk of Association The Coca Cola Company engaged i n legitimate business activities that do not get around the laws of the jurisdiction where the company is headquartered or carries on its business. After check outing its financial statement, we believed that its financial is stability and liquidity. Technical Competence The auditors who will perform the auditing are well practised due to the complexities of the modern business world. And also, the auditors affirm the necessary technical competence to perform the required work or risk potential liability or damage to reputation.Professional Fees Audit fees charged to The Coca Cola Company will base on commensurate with the risks to the providing the services requested. The fees will cover adequately the cost of the services provided. III. Ch2 Obtaining an understanding of the entity and its environment In the 21st century, the beverage perseverance has been become one of the fastest developing industries and the competition in this industry become significantly. Even in this ma rket share campaign, The Coca Cola Company still remains its leader position in the beverage industry.The Coca-Cola Company and six of their largest bottling partners developed a strategy for sustainability in 2002. That plan focuses on the role and impact of the Coca-Cola system in four key areas workplace, marketplace, environment and community. Furthermore, The Coca-Cola Company uses this strategy to guide the approach to sustainability issues and to report the progress. 3 In last course, when lots of companies in the industry are going down, The Coca-Cola Company still delivering consistent performance.For its native control, the company follows the independent and experience requirement of NYSE and SEC for many years. And the audit committee has been composed entirely of non-management directors. 4 IV. Ch3 Preliminary Engagement Activities Every fragment in our audit team is well trained and performs follow by the conduct of AICPA and SEC. Regarding to the ethical and indepe ndence matter, we has three major requirements. 1. Our auditor have to sign the contract to make sure that he/she will not take a position in the The Coca-Cola Company in two years 2.We will not hire the auditor who uses to work in The Coca-Cola Company. 3. We required the auditor to report to the partner who has special relationship with the The Coca-Cola Company. V. Ch4 Risk and Establish Materiality The Coca-Cola Company is a globalization company it faces various issues. For example, Obesity concerns, water scarcity and poor flavor, increased competition, and evolving consumer preferences are risks having the potential to have a existent unbecoming effect on our client.To be an auditor, we assess clients RMM (risk of corporal misstatement) with understanding the client entity and industry. After audit risk is set, we go further to assesses immanent and control (environment) risks. In addition, assessing clients inherent and control risks which can influence the level of det ection risk directly. Base on the case, we make an assumption in order to maintain the audit risk. The following table shows numerical and non-numerical example of audit risk. Audit Risk RMM DR IR CR 5% 50% 20% 50% low break low moderate Audit risk on most engagements is much lower than 5%. 5According to conservative assumptions that we fall inherent risk is assessed at moderate (50%). The Coca-Cola Company is a multinational company, so there are not only lots of accounts due which come from incompatible branches in the world, but also lots of inventories which were made or stored in different factories and warehouses in the world. As the reasons above, The Coca-Cola Company may face some risks, such as is there reason to believe that receivables include significant balances in foreign currencies?Is there reason to believe that the existence of the accounts receivables which generate from different oversea branch companies or subsidiaries? are there significant foreign money inventories balance? Are manufactured inventories transferred between locations, divisions, or subsidiaries within a consolidated entity? Are there worldly-inventories owned by the client but held by others (e. g. , on allegiance with customers)? Therefore, we should assess the inherent risk in moderate level.On the basis of our experience, subsequently we read the predecessor auditors report and our clients past annual report. We presumed that our client has well interior(a) control so that we can assess the control risk in low level. Overall, in order to keep the audit risk in low level, we decided our detection risk in moderate level. Besides, in our clients industry there are some companies that try to inflate their gross and assets so in our audit we will focus on operating cycle.In other words, we will put emphasis on auditing accounts receivable and caudex to make sure there are no major account statement schemes or fraud that will mislead the presentation of fi nancial statements. Materiality Materiality includes both the nature of the misstatement, as well as the dollar amount of misstatement, and must be judged in importance by financial statement users. 6 In our engagement, we will use the nature and dollar amount to decide what materially is for our client as the follow chart. Account Accounts receivable Inventory Materiality reputation 1. Recognize revenue in wrong blockage 1. Easy to thief 2. The existence of the A/R 2.Hard to count the ending balance 3. Risk of foreign currency exchange Dollar amount In our firms policy, in manufacture industry we adopt the 10% of net income afterwardThe same as left column. tax to decide the materiality. For example, the net income 2007 multiply 10% $5,981M*10%=600M VI. Ch5 Consider Internal Control 1. Define Internal Control According to the COSOs definition of internal control, a process, effected by an entitys board of directors, management, and other personnel designed to provide reasonable boldness regarding the achievement of objectives in the following categories (1) reliability of financial reporting, (2) compliance with applicable laws and regulations, and (3) persuasiveness and efficiency of operations. 7 2. Identify some controls that would be relevant to the audit. Account Accounts receivable Inventory Control Authority Inquire near credit procedure for new customers (Valuation) When shipping the Inventory to vendor or supplier, the From a population of okay sales orders (and returns), select awarehouseman should get the correct authority shipping sample and examine documents for evidence of credit check document. (Valuation) Custody devise daily cash summary (copy to A/R and Accounting) Observe physical controls over inventory. Segregation of duty Mailroom & cashier Segregation of duty Warehouse & expatriation Recording keeping Trace a sample of shipping documents (selection from pre-numbered The perpetual records s hould reconcile to the general shipping documents) to sales invoice, sales journal, and A/R ledger. hold in file (Completeness) The reconciliation of Inventory and the Lower or market Match remittance advices and check deposit summary price valuation should be review by proper accounting manager or management. 3. Discuss the components of Internal Control Control environment After we understand the internal control procedure and policy, we ensure that our client has ideal control procedure, high ethical standard, and monitoring processes. Risk assessment Risk exist in the oversea marketplace (in failures to combine China companies) In failures to accurately record and report financial information. Control activities Authority Custody Segregation of duty Recording keeping Information and chat Our client has good information and communication function including initiating, authorizing, recording, processing, and reporting entity transactions, conditions, and events. Monitoring Our client use computer accounting software and system to assess the quality of other transaction and operational controls over time. It includes the periodic assessment of both the design and operation of controls on a timely basis. 4. The elements involved in flummoxing an understanding of Internal Control We should obtain an understanding of the five components of internal control sufficient to A. Evaluating the design of relevant controls and determining whether they have been implemented. B. Assess the risk of material misstatement. C. Design the nature, extent, and timing of further audit procedures. 5. Access Control Risk We should assess the inherent risk in moderate level.On the basis of our experience, after we read the predecessor auditors report and our clients internal control procedures. We can presume that our client has well internal control so we can assess the control risk in low level. 6. Managements Responsibilities and the auditors resp onsibilities under Section 404. Managements The auditors Laws or standards Sarbanes-Oxley Act of 2002 ( for publicly traded Second standard of fieldwork companies) 2. PCAOB Auditing meter No. (AS 5) Responsibilities In addition to certifying the companys financial Auditors must provide their opinion on the effectiveness of statements (Section 302), management must also report on clients internal control. the companys internal control over financial reporting (Section 404). (Chris Linsteadt, 2008 Audit Class Slides ch6) VII. Ch6 Plan the Audit 1. Assess the need for specialists In our case, we should hire some computer audit experts who can help our firm to make sure that our clients accounting system is sate and correct. 2. Assess the possibility of illegal acts. Risk The possibility of illegal acts Is there reason to believe that the existence of the accounts There were some circumvent transactions which were made by management or employees. receivables which generate from different oversea branch companies or If the sales dont get proper credit authority, there will be huge bad debt subsidiaries? expense in the future Are there material-inventories owned by the client but held by others The management may try to inflate the sales in the end of year so he may try to (e. g. , on consignment with customers)? recognize consignment as sales revenue. The management may use consignment to control the companys ending inventory or COGS. Are manufactured inventories transferred between locations, divisions,The management may use complicated related party transaction to generate fake or subsidiaries within a consolidated entity? sales or ending inventory. The employees may have chance to steal the coke formula or inventories. 3. Identify related parties After we discussed with the management and check over the related party transactions, there is no material related party transaction in this engagement. 4.Conduct preliminary analytic al procedures. Accounts Receivable Inventory equalise with industry rate to make sure our clients A/R turnover rate and Compare with industry rate to make sure our clients inventory turnover days are reasonable. rate and days are reasonable. Compare our clients allowance for doubtful account policy with competitorsMake sure the change in our clients inventories is reasonable without policy to make sure the bad debt expenses are reasonable estimated. material misstatement. Make sure the change in our clients A/R is reasonable without material misstatement. 5. Consider additional value added services. After we obtain and understand our clients internal control, we should detect our clients internal control. We can prepare a feedback report to our client and help our client to improve their internal control or accounting system. Besides, when our clients face some problems about new accounting standards, we could help our clients to train their accountants 6. Audit Plan and A udit program. Receivables Name of guest Period Estimated audit hours Audit procedures Sign and date by Working paper Ref. auditors 01. screen out PROPRIETY OF taxation RECOGNITION POLICIES AND PROCEDURES Receivables Validity, Cutoff 02.CONFIRM RECEIVABLES Validity, Completeness, Recording, and Cutoff Q04 No 03. political campaign THE ALLOWANCE FOR DOUBTFUL ACCOUNTS AND BAD DEBT EXPENSE Valuation 04. psychometric test PRESENTATION OF RECEIVABLES Presentation 05. TEST LATE CUTOFF OF gross revenue Cutoff Q01A Sales Invoices 06. TEST LATE CUTOFF OF SALES Cutoff Q01A Initial Records 07.ROLL-FORWARD TEST FOR RECEIVABLES TESTED PRIOR TO YEAR END Validity, Completeness, Recording, Cutoff 08. TEST RECEIVABLES TO SUBSEQUENT CASH RECEIPTS Validity, Completeness, Recording, Cutoff 09. TEST ALLOWANCES FOR SALES RETURNS AND DISCOUNTS Valuation 10. TEST PRESENTATION OF RELATED-PARTY RECEIVABLES Presentation 11. TEST VALUATION OF FOREIGN CURRENCY RECEIVABLES Valuation Reviewer Sign Date 6. Audit Plan and Audit program. Inventory Name of Client Period Estimated audit hours Audit procedures Sign and date by Working paper Ref. auditors 01. OBSERVE AND TEST-COUNT INVENTORIES Validity, Completeness, Recording, Cutoff, Valuation 02. TEST THE FINAL INVENTORY COMPILATION Validity, Completeness, Recording, and Cutoff 03. TEST marketplace VALUATION RESERVES Valuation 04. TEST PRESENTATION OF INVENTORY Presentation 05.TEST LATE CUTOFF OF INVENTORY PURCHASES Cutoff Q05A Recorded Purchases 06. TEST EARLY CUTOFF OF DEBIT NOTES Cutoff 07. TEST BOOK TO PHYSICAL ADJUSTMENTS Validity, Completeness, Recording 08. ROLL-FORWARD TEST FOR INVENTORIES PRICE TESTED PRIOR TO YEAR END Validity, Completeness, Recording, Cutoff 09.TEST ELIMINATION OF INTERCOMPANY PROFIT Valuation 10. TEST BALANCES DENOMINATED IN FOREIGN CURRENCIES Valuation 11. TEST PRESENTATION OF RELATED-PARTY BALANCES Presentation Reviewer Sign Date VIII. Ch7 Complete the Audit The auditors responsibilities during the completion stage of the audit Before issuing the audit report, the auditor needs to 1.Perform a final review of the audit to be sure the financial statements are fairly presented and the audit documentation supports the audit report 2. Assess the ability of the client to continue as a going concern, and 3. Make a final review of the auditors assessment of internal control based on evidence gathered and any material misstatements identified in the financial statement audit. In addition, we should get the management model letter and letter of audit inquiry to make sure there are no material contingent liabilities and events subsequent to the financial statements and keep communicating with the audit committee. The follow data are made by assumption Contingent Liabilities Subsequent events Our client may lose the litigat ion about conjugation in oversea. It will cause a Note disclosure huge loss for our client. On January8, 2009, our Company sold substantially all of our interest in Vonpar Refrescos S. A. (Vonpar), a bottler headquartered in Brazil. Total proceeds from the sale were approximately $238million, and we recognized a gain on this sale of approximately $71million.Prior to this sale, our Company owned approximately 49percent of Vonpars outstanding common stock and accounted for the investment using the equity system Our client is a multinational company so it may have the threat of expropriation of assets in a foreign country. Our client may get loss in the highly competitive nonalcoholic beverages industry.If our client signs purchase and sale commitments with its supplier, it may get a huge loss in the future. Other important investments which will change our clients accounting principle similar as above. IX. Ch8 Evaluate results and issue an audit report Inde pendent Auditors Report The Board of Directors and Stockholders The Coca-Cola CompanyWe have audited the consolidated balance sheets of the Coca-Cola Company and subsidiaries (the Company) as of December 31, 2007 and 2008, and the related consolidated statement of income, stockholders equity and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements bases on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements refereed to above present fairly, in all material respects, the financial position of the Coca-Cola Company and subsidiaries as of December 31, 2007 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in accordance with accounting principles generally accepted in the United States of America.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated material issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO), and our report dated March 14, 2009 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting. Lee &Cheng &Lin LLP Dallas, U. S. A. March 14, 2009 X. References The company description, Market watch http//www. marketwatch. om/tools/quotes/profile. asp? symb=ko Deppe, Larry A. , Client acceptance what to look for and why. (Tips for accountants on deciding which new clients to accept) (Cover Story), The CPA daybook , May 1992, Strategic vision, The Coca Cola Company website 2008The proxy statement, The Coca Cola Company website, Chris, Linsteadt, 2008 Audit Class Slides Rittenberg, Schwieger, Johnstone. Auditing, A task Risk Approach. Thomson&South-Western Publishing. 6th,2008 SEC filing The Coca Cola Company website Retrieved from the World Wide Web XI. Attachment (Financial Statements) amalgamated Balance Sheet COCA grass CO 10-K 02/28/2008 ? Balance Sheet December 31, 2007. 00 2006. 0 (In millions except par value) ? ? ASSETS ? ? ? ? CURRENT ASSETS ? ? ? ? Cash and cash equivalents $4,093 $2,440 Marketable securities ? 215 ? 150 Trade accounts receivable, slight allowances ? 3,317 ? 2,587 of $56 and $63, severally Inventories ? 2,220 ? 1,641 Prepaid expenses and other assets ? 2,260 ? 1,623 TOTAL CURRENT ASSETS ? 12,105 ? 8,441 INVESTMENTS ? ? ? ? Equity method investments ? ? ? ? Coca-Cola Enterprises Inc. ? 1,637 ? 1,312 Coca-Cola Hellenic Bottling Company S. A. ? 1,549 ? 1,251 Coca-Cola FEMSA, S. A. B. de C. V. ? 996 ? 835 Coca-Cola Amatil Limited ? 806 ? 817 Other, principally bottling companies ? 2,301 ? 2,095 and joint ventures Cost method investments, principally ? 488 ? 473 bottling companies TOTAL INVESTMENTS ? 7,777 ? 6,783 OTHER ASSETS ? 2,675 ? 2,701 PROPERTY, PLANT AND EQUIPMENT net ? 8,493 ? 6,903 TRADEMARKS WITH INDEFINITE LIVES ? 5,153 ? 2,045 GOODWILL ? 4,256 ? 1,403 OTHER INTANGIBLE ASSETS ? 2,810 ? 1,687 TOTAL ASSETS $43, 269 $29,963 LIABILITIES AND SHAREOWNERS EQUITY ? ? ? ? CURRENT LIABILITIES ? ? ? ? Accounts account payable and accrued expenses $6,915 $5,055 Loans and notes payable ? 5,919 ? 3,235 Current maturities of long-term debt ? 133 ? 33 Accrued income taxes ? 258 ? 567 TOTAL CURRENT LIABILITIES ? 13,225 ? 8,890 LONG-TERM DEBT ? 3,277 ? 1,314 OTHER LIABILITIES ? 3,133 ? 2,231 DEFERRED INCOME TAXES ? 1,890 ? 608 SHAREOWNERS EQUITY ? ? ? ? Common stock, $0. 25 par value Authorized 5,600 ? 880 ? 878 shares Issued 3,519 and 3,511 shares, respectively Capital surplus ? 7,378 ? 5,983 Reinvested earnings ? 36,235 ? 33,468 Accumulated other comprehensive income ? 626 ? (1,291) (loss) Treasury stock, at cost 1,201 and 1,193 ? ? shares, respectively TOTAL SHAREOWNERS EQUITY ? 21,744 ? 16,920 TOTAL LIABILITIES AND SHAREOWNERS EQUITY $43,269 $29,963 Consolidated Income Statement COCA COLA CO 10-K 02/28/2008 ? Income Statement Ye ar stop December 31, 2007. 00 2006. 00 (In millions except per share data) ? ? NET OPERATING REVENUES $28,857 $24,088 Cost of goods sold ? 10,406 ? 8,164 GROSS PROFIT ? 18,451 ? 15,924 Selling, general and administrative expenses ? 10,945 ? 9,431 Other operating charges ? 254 ? 185 OPERATING INCOME ? 7,252 ? 6,308 Interest income ? 236 ? 193 Interest expense ? 456 ? 220 Equity income net ? 668 ? 102 Other income (loss) net ? 173 ? 195 Gains on issuances of stock by equity method ? ? ? ? investees INCOME BEFORE INCOME TAXES ? 7,873 ? 6,578 Income taxes ? 1,892 ? 1,498 NET INCOME $5,981 $5,080 BASIC NET INCOME PER SHARE $2. 59 $2. 16 DILUTED NET INCOME PER SHARE $2. 57 $2. 16 AVERAGE SHARES OUTSTANDING ? 2,313 ? 2,348 Effect of dilutive securities ? 18 ? 2 AVERAGE SHARES OUTSTANDING ASSUMING DILUTION ? 2,331 ? 2,350 Consolidated Statements of Cash Flows COCA COLA CO 10-K 02/28/2008 ? Cash Flows ? ? ? ? ? ? ? ? Year Ended December 31, 2007. 00 2006. 00 (In millions) ? ? ? OPERATING ACTIVITIES ? ? ? ? gain income $5,981 $5,080 Depreciation and amortization ? 1,163 ? 938 Stock-based compensation expense ? 313 ? 324 Deferred income taxes ? 109 ? (35) Equity income or loss, net of dividends ? (452) ? 124 Foreign currency adjustments ? 9 ? 52 Gains on issuances of stock by equity investees ? ? ? ? Gains on sales of assets, including bottling ? (244) ? (303) interests Other operating charges ? 166 ? 159 Other items ? 99 ? 233 Net change in operating assets and liabilities ? 6 ? (615) Net cash provided by operating activities ? 7,150 ? 5,957 INVESTING ACTIVITIES ? ? ? ? Acquisitions and investments, principally ? (5,653) ? (901) beverage and bottling companies Purchases of other investments ? (99) ? (82) Proceeds from disposals of other investments ? 448 ? 640 Purchases of property, limit and equipment ? (1,648) ? (1,407) Proceeds from disposals of property, plant ? 239 ? 112 and equipment Other investing activities ? (6) ? (62) Net cash used in investing activities ? (6,719) ? (1,700) FINANCING ACTIVITIES ? ? ? ? Issuances of debt ? 9,979 ? 617 Payments of debt ? (5,638) ? (2,021) Issuances of stock ? 1,619 ? 148 Purchases of stock for treasury ? (1,838) ? (2,416) Dividends ? (3,149) ? (2,911) Net cash provided by (used in) backing ? 973 ? (6,583) activities EFFECT OF EXCHANGE RATE CHANGES ON CASH ? 249 ? 65 AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS ? ? ? ? Net increase (decrease) during the year ? 1,653 ? (2,261) Balance at low gear of year ? 2,440 ? 4,701 Balance at end of year $4,093 $2,440 Consolidated Statements of Shareowners Equity COCA COLA CO 10-K 02/28/2008 ? CONSOLIDATED STATEMENTS OF SHAREOWNERS146 EQUITY Year Ended December 31, 2007. 00 2006. 00 (In millions except per share data) ? ? ? NUMBER OF COMMON SHARES OUTSTANDING ? ? ? ? Balance at beginning of year ? 2,318 ? 2,369 Stock issued to employees exercise stock ? 8 ? 4 pickaxes Purchases of stock for treasury 1 ? (35) ? (55) Treasury stock issued to employees exercising ? 23 ? ? stock options Treasury stock issued to former shareholders ? 4 ? ? of glaceau Balance at end of year ? 2,318 ? 2,318 COMMON STOCK ? ? ? ? Balance at beginning of year $878 $877 Stock issued to employees exercising stock ? 2 ? 1 options Balance at end of year ? 880 ? 878 CAPITAL SURPLUS ? ? ? ? Balance at beginning of year ? 5,983 ? 5,492 Stock issued to employees exercising stock ? 1,001 ? 164 options Tax (charge) benefit from employees stock ? (28) ? 3 option and restricted stock plans Stock-based compensation ? 309 ? 324 Stock purchased by former shareholders ? 113 ? ? of glaceau Balance at end of year ? 7,378 ? 5,983 REINVESTED EARNINGS ? ? ? ? Balance at beginning of year ? 33,468 ? 31,299 leeway for the cum ulative effect on ? (65) ? ? prior years of the adoption of Interpretation No. 48 Net income ? 5,981 ? 5,080 Dividends (per share $1. 36, $1. 24 and $1. 12 ? (3,149) ? (2,911) in 2007, 2006 and 2005, respectively) Balance at end of year ? 36,235 ? 33,468 ACCUMULATED OTHER COMPREHENSIVE INCOME ? ? ? ? (LOSS) Balance at beginning of year ? (1,291) ? (1,669) Net foreign currency description adjustment ? 1,575 ? 603 Net gain (loss) on derivatives ? (64) ? (26) Net change in unrealized gain on available-for-sale ? 14 ? 43 securities Net change in pension liability ? 392 ? ? Net change in pension liability, prior ? ? ? 46 to adoption of SFAS No. 58 Net other comprehensive income adjustments ? 1,917 ? 666 Adjustment to initially apply SFAS No. 158 ? ? ? (288) Balance at end of year ? 626 ? (1,291) TREASURY STOCK ? ? ? ? Balance at beginning of year ? (22,118) ? (19,644) Stock issued to employees exercising stock ? 428 ? ? options Stock purchased by former shareholders ? 66 ? ? of glaceau Purchases of treasury stock ? (1,751) ? (2,474) Balance at end of year ? (23,375) ? (22,118) TOTAL SHAREOWNERS EQUITY $21,744 $16,920 COMPREHENSIVE INCOME ? ? ? ? Net income $5,981 $5,080 Net other comprehensive income adjustments ? 1,917 ? 666 TOTAL COMPREHENSIVE INCOME $7,898 $5,746 8 1 http//www. marketwatch. com/tools/quotes/profile. asp? symb=ko 2 http//www. nysscpa. org/cpajournal/old/12543349. htm 3 http//www. thecoca-colacompany. com/citizenship/strategic_vision. html 4 http//www. thecoca-colacompany. com/investors/proxies. html 5 Rittenberg, Schwieger, Johnstone, p105 6 Rittenberg, Schwieger, Johnstone, p101 7 Chris, Linsteadt, 2008 Audit Class Slides Ch6 8 http//ir. thecoca-colacompany. com/phoenix. zhtml? c=94566&p=irol-sec&se

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