Southern New Hampshire University
ACC 411 Auditing Principles
Project Three
Financial Statement Audit Report
02:22:38 GMT -05:00
, To the Shareholders and Board of Directors of Cloud9, Inc,
This audit aimed to provide our opinion on Cloud9, Inc.’s financial statement for the year
ending December 31,2025. We conducted the audit in adherence to the standards set by the
Public Company Accounting Oversight Boards (PCAOB). We have audited the balance sheets of
the company as of December 31, 2025, and 2024, along with the related statements of income,
stockholders’ equity, comprehensive income, and cash flows for each of the three years ending
December 31, 2025, as well as related notes and schedules. Our report dated February 20, 2026,
collectively referred to as the financial statements, conveys our opinion.
Cloud9 recognizes contracts before completing obligations, violating ASC 606. This
standard emphasizes recognizing revenue only upon satisfying performance obligations. This
affects revenue recognition due to 100 contracts being verified by clients. Financial ratios
indicate solvency, but management expects a decline in earnings due to new store and
sponsorship costs. Although major borrowings are not due for four years, the unused line of
credit may be drawn upon if unexpected cash needs arise. Testing revealed two errors in
accounts receivable confirmations, resulting in customer overcharges. While corrected by the
client, the delayed corrections raise concerns about timely rectification.
In addition, testing unveiled a classification error in a month-end accrual, affecting
accounts payable and accrued liabilities. While there is no P&L impact, accounts payable were
understated, and accrued liabilities were overstated. Fixed asset testing exposed an
understatement of assets and accounts payable. The understatement amounted to $463,197
against a performance materiality of $1 million. The opening of Cloud9's first retail store
introduces new risks like inventory theft and increased sales returns. Although currently not
02:22:38 GMT -05:00
ACC 411 Auditing Principles
Project Three
Financial Statement Audit Report
02:22:38 GMT -05:00
, To the Shareholders and Board of Directors of Cloud9, Inc,
This audit aimed to provide our opinion on Cloud9, Inc.’s financial statement for the year
ending December 31,2025. We conducted the audit in adherence to the standards set by the
Public Company Accounting Oversight Boards (PCAOB). We have audited the balance sheets of
the company as of December 31, 2025, and 2024, along with the related statements of income,
stockholders’ equity, comprehensive income, and cash flows for each of the three years ending
December 31, 2025, as well as related notes and schedules. Our report dated February 20, 2026,
collectively referred to as the financial statements, conveys our opinion.
Cloud9 recognizes contracts before completing obligations, violating ASC 606. This
standard emphasizes recognizing revenue only upon satisfying performance obligations. This
affects revenue recognition due to 100 contracts being verified by clients. Financial ratios
indicate solvency, but management expects a decline in earnings due to new store and
sponsorship costs. Although major borrowings are not due for four years, the unused line of
credit may be drawn upon if unexpected cash needs arise. Testing revealed two errors in
accounts receivable confirmations, resulting in customer overcharges. While corrected by the
client, the delayed corrections raise concerns about timely rectification.
In addition, testing unveiled a classification error in a month-end accrual, affecting
accounts payable and accrued liabilities. While there is no P&L impact, accounts payable were
understated, and accrued liabilities were overstated. Fixed asset testing exposed an
understatement of assets and accounts payable. The understatement amounted to $463,197
against a performance materiality of $1 million. The opening of Cloud9's first retail store
introduces new risks like inventory theft and increased sales returns. Although currently not
02:22:38 GMT -05:00
