Blasi Sunshine Golf Enterprises (BSGE), a publicly traded company  based in Fort Myers, Florida, is preparing to host its annual "Sunshine  Swing" golf tournament. The event is a significant revenue generator and  attracts golfers from across the country. CEO John Blasi and CFO  Stephanie Clemente are discussing the upcoming audit. In the BSGE  boardroom overlooking the 18th hole, John Blasi and Stephanie are deep  in conversation.

John: "Stephanie, why are we spending so much on these auditors? It's just a legal hoop we have to jump through, right?"

Stephanie: "Actually, John, it's more than just a legal requirement. The audit is crucial and beneficial to us for several reasons."

John: "But we've been running company for years without issues. What's changed?"

Stephanie: "Well, to answer your question, it’s  important to understand what’s happened in the past. Auditing has been  around since ancient times, but it really took off during the Industrial  Revolution. After the 1929 stock market crash, the need for independent  audits became clear. The Securities Acts of 1933 and 1934 made audits  mandatory for public companies like ours."

John: "Interesting, but why do they seem to focus on analytical procedures so much?"

Stephanie: "Analytical procedures help identify  unusual fluctuations or relationships in financial data. For golf  tournaments like we host, for example, they could reveal inconsistencies  in revenue reporting, unexpected expenses, or even potential fraud."

John: "Fraud? In our company?"

Stephanie: "It's not about suspicion, John. It's  about assurance. These procedures give our stakeholders confidence in  our financial reporting. Remember the Enron scandal? That led to the  Sarbanes-Oxley Act of 2002, which further emphasized the importance of  thorough audits."

John: "I see. So it's not just about compliance, but also about maintaining trust and credibility?"

Stephanie: "Exactly. Plus, these procedures often  uncover inefficiencies or areas for improvement in our operations.  They're a valuable tool for us, not just a legal obligation."

John Blasi: "Alright, you've convinced me. Let's  make sure we give the auditors everything they need. But, I still  believe that without rules and regulations, there wouldn't be the need  for audits to the extent of applying analytical procedures, considering  the big data environment we’re in and with our use of Artificial  Intelligence.”

Requirements

• Prepare a two-page memo that addresses (1) the CEO's declaration  that audits are needed only because the law requires it and (2) the  impact of AI on audit engagements. You should research and discuss in  your memo the ways in which AI is being used in the audit field and its  potential effects on analytical procedures.
• For this case, you will brainstorm with your group members and use  all resources available to you to develop the main points you want to  make in your memo. However, for Case 1, you are to individually write  your memo in your own words, such that each team member will submit  their own individually written memo.
• During brainstorming, consider and discuss how AI can enhance data  analysis, identify anomalies more efficiently, and potentially reduce  audit costs. The team needs to address CEO John Blasi's concerns about  the extent of audits in a big data environment. Explain how AI, while  powerful, can only partially replace human judgment and expertise in  auditing. Highlight the role of auditors in evaluating AI-generated  insights and ensuring audit quality. Summarize the key points, recap the  importance of analytical procedures, even in the age of AI, and  emphasize the role of auditors in providing assurance and protecting the  company's reputation.

• Recommended Key Points to Address
   
  • Legal and Assurance Role of Audits: The memo needs to address and  emphasize that audits are not just legal requirements but are vital for  financial integrity and stakeholder trust.
  • Impact of AI in Auditing: The memo needs to address how AI tools can  streamline data analysis and identify irregularities but cannot replace  human expertise.
  • Ongoing Need for Analytical Procedures: Despite technological  advances, human auditors are essential for understanding and judgment in  financial reporting.