1. e-Vision – Business Models, Business Risks and Audit Risk Assessment Authors: J. Efrim Boritz and Theophanis Stratopoulos The University of Waterloo Discussant: Glen Mazur, CA∙CISA BDO Dunwoody LLP

2. Evaluation of Case Content Strengths ◦Overall a solid case with excellent class room potential ◦Easily scalable for difficulty Potential Drawbacks ◦Lack of material surrounding internal controls ◦Financials are over-simplified with ambiguity ◦Lack of information surrounding management’s abilities and internal capabilities; risks of process change is hard to assess given facts

3. Evaluation of Teaching Notes - General Strengths ◦Overall a good coverage of key issues ◦Depending on course background of students relatively good in-depth coverage of the issues Potential Drawbacks ◦No discussion of potential severances or other unaccrued liabilities ◦Many software companies have remote connections to customers – would be excellent place to introduce IT controls to students

4. Evaluation – First Challenge Strengths ◦Very good coverage of HIPAA risks ◦Deferred costs was a good discussion point Potential Drawbacks ◦HIPAA has right to audit; what critical procedures should we verify to ensure no impairment to receivables or future revenues ◦External verification of compliance; if not, potential liabilities for breaches of security

5. Evaluation – Challenge 2 Strengths ◦Emphasis on top line revenue was very valid ◦Megers and acquisitions creating valuation of intangibles was good Potential Drawbacks ◦No discussion of economic downturn in US, healthcare plan coverage, etc. ◦No discussion of US interest rates and what affect this might have on cash flow discounting for impairment testing ◦No discussion on unaccrued sales commissions; my experience has found end-of-contract payouts unaccrued

6. Evaluation – Challenge 3 Strengths ◦Solid point re: valuation of shares taken as a lot of students not likely familiar with non- public share valuations ◦Good discussion of NMT’s (as presented) Potential Drawbacks ◦No discussion of monitoring %ownership of customers; for small companies could create significant influence issues ◦No discussion re: potential other NMT’s

7. Evaluation – Challenge 4 Strengths ◦R&D capitalization was key to this area ◦Point of resource allocation was valid but 100-50% fee reduction seemed large; if anything like a prof. Services firm, billing rates would be moved down accordingly ◦Liked incorporating IT strategic plans into discussion; however (see below) Potential Drawbacks ◦If billing rates used, amount charged per project can be skewed with cheaper labour on some, affecting margins, COGS, and inventory ◦Strategic IT requires large capital; can e-Vision meet these needs or will they require financing for the first time – then risk of cash flows, covenants

8. Concluding Thoughts Excellent case to highlight several auditing issues in an IT intensive business Potential to add an extra level of complexity to the decision making model – what area’s of risk, audit assertions affected and potential audit procedures