2.

A.Whatsthecompanysindustry?
Googleisaglobaltechnologyleaderfocusedonimprovingthewaypeopleconnectwithand
findinformation.Thefocusoninnovativewebsearchandadvertising.Theyfallintothe
internettechnologyindustry.However,theyhavebranchedoutintootherindustriessuchas
themobiledevicemarket,videostreaming,advertising,

B.Whatareitsprimaryproducts?
Googleswebsiteisitsmainproductwhichprovidesitscustomerswithfastaccessto
informationusingitsamazingsearchengine.Googlehasadvertisingprogramssuchas
AdWordsandAdSensethatareusedbymanycompaniesworldwidetopromotetheir
productsandserviceswithadvertisingonbothGoogleownedpropertiesandpublisherssites
acrosstheweb.GooglesMotorolasectorfocusesonmobilewirelessdevicesandother
productsandproductsservices.Itsrevenueisgeneratedprimarilyfromsellinghardware
products.

C.Whatrawmaterialsdoesthecompanyuse?
Googlesproductsandservicesaremadeupofthestorageandtransmissionsofusersand
customersinformation.OtherrawmaterialswouldbethepartsrequiredtomaketheMotorola
mobiledevices

D.Howlargeisthecompany?

Sales:
FortheyearendedDecember31,2013saleswere$7,253,000,000.Thatisthecombined
revenueofGoogleanditsMotorolasegment.

Assets:
AsofDecember31,2013thetotalassetsofGoogleare$110,920,000,000.

Employees:
AtDecember31,2013Googlehadatotalof47,756fulltimeemployees.

E.Whereisthecompanylocated?
GooglesHeadquartersislocatedinMountainView,Californiawheretheyown3.8million
squarefeetofofficespaceand15acresofundevelopedlandforfuturegrowth.

F.Whatotherpeople/companiesarecloselyassociatedwiththecompany?
GoogleiscloselyassociatedwithMotorolasinceGoogleownsthiscompany.Lenovowould
alsobeanassociatesincetheyhaveadealtosellpartofMotorolatolenovo.

G.Whattypeofimagedoesitconvey?

TheannualreportstatesthatGooglesconsolidatedbalancesheetdatedisderivedfrom
auditedfinancialstatements.TheoverviewsaysthatGoogleisaninnovatorinsearchengine
andadvertisingtechnology.

H.Whatarethesegmentsandfunctionalcontentsofthereport?
Thesegmentsofthereportinclude:Selectedfinancialdata,anoverviewofGooglespurpose
andwhatitisasacompany,trendsinthebusiness,resultsofoperations,consolidated
statementsofIncomedata,revenuesbysegment,revenuesbygeography,foreignexchange
impactonrevenue,costsandexpenses,researchanddevelopment,salesandmarketing,
generalandadministrativeexpenses,chargerelatedtotheResolutionofDepartmentof
JusticeInvestigation,Restructuringandrelatedcharges,stockbasedcompensation,interest
andotherincome,provisionforincometaxes,NetIncome(loss)fromDiscontinued
Operations,QuarterlyresultsofOperations,LiquidityandCapitalResources,Contractual
ObligationsasofDecember31,2013,OffBalanceSheetEntities,CriticalAccountingPolicies
andEstimates,QuantitativeandQualitativeDisclosuresAboutMarketRisk,Financial
StatementsandSupplementarydata,reportofIndependentlyregisteredaccountingfirm,
ConsolidatedBalanceSheet,ConsolidateStatementofIncome,ConsolidatedStatementof
ComprehensiveIncome,ConsolidatedStatementofStockholder'sEquity,Consolidated
StatementofCashFlows,NotestoConsolidatedFinancialStatements,FinancialInstruments,

3.
Howdoesthe10KdifferfromtheAnnualreport?
Theannualreporttoshareholdersistheprincipaldocumentusedbymostpubliccompanies
todisclosecorporateinformationtotheirshareholders.Itisusuallyastateofthecompany
report,includinganopeningletterfromtheChiefExecutiveOfficer,financialdata,resultsof
continuingoperations,marketsegmentinformation,newproductplans,subsidiaryactivities,
andresearchanddevelopmentactivitiesonfutureprograms.Theform10K,whichmustbe
filedwiththeSEC,typicallycontainsmoredetailedinformationaboutthecompanysfinancial
conditionthantheannualreport.

4.
A.Whatarethekeyeconomicfactorsabouttheindustry?
TheeconomicimpactthatGooglehasontheindustryisdeterminedbyexaminingthevalue
providedbyGoogleSearch,AdWords,AdSense,andGoogleGrantsineachstate.Googles
ChiefEconomist,HalVarion,madetheestimatethatbusinessesmaketwodollarsforevery
dollarspentusingAdWords.Academicresearchers,BernardJansenandAmandaSpink,
madeanotherassumptionthatbusinessesreceivefiveclicksontheirsearchresultsfor
everyoneclickontheirads.Ifsearchclicksbroughtinasmuchrevenueasadclicks,then
thesetwoassumptionsbelievethatbusinessesreceiveelevendollarsforeverydollarspent
onAdWords.However,clickingthroughsearchresultsmightnotbeasvaluableasadclicks,
soGooglehasanotherestimatetobeconservative.Googlebelievesthatsearchclicksare

about70%asvaluableasadclickssotheyusethefollowingequationtodeterminehowmuch
businessesmakeoffofeverydollarspentusingAdWords.

2(spend)+.7x5x2(spend)(spend)=8(spend)

Inordertodeterminetheeconomicvaluereceivedbyadvertisersin2012,Googlewould
multiplyhowmuchacompanyspentonAdWordsby8.

FortheeconomicimpactofAdSense,Googlejustestimatedtheamounttheypaidto
publishersineachstateforplacingtheiradsnexttothepublisherscontent.

GoogleGrantseconomicimpactisdeterminedbythetotalamountspentbygrantrecipientsin
thecurrentyearoutofthetenthousanddollarsgrantedtothem.

Totaleconomicvalueforeachstateisestimatedastheeconomicactivityprovidedfor
localbusinesses,websitepublishers,andnonprofitsbyGoogleSearchandAdWords,
GoogleAdSense,andGoogleGrants,respectively,inthecurrentyear.

B.Wheresisthecompanyinitslifecycle?

Inthesevenstagesofacompanyslifecycle,Googlewouldfallintotheexpansionphase.
Thecompanyhasdonewellenoughtobranchoutintoothermarkets.Googlehasbranched
outintothemobiledevicemarketwiththeirMotorolasegment.Googlehasplentyofinvestors
toprovidethemwithenoughcapitaltoallowexpansion.
http://justintimemanagement.com/the7stagesofbusinesslifecycle

C.Whatarethefiveorsixmostimportantfactorsforsuccessinthisbusiness?
CoordinatedLeadershipGroup,commitmenttocuttingedgetechnology,wiseexpansion,
subtlemarketing,
http://smallbusiness.chron.com/googleskeysuccessfactors27311.html
http://searchengineland.com/guide/seo/typesofsearchenginerankingfactors

D.Howdoesthiscompanystandwithrespecttothesefactors?

CoordinatedLeadershipgroup:Googles3executivesrefertothemselvesasaclassic
leadershipmolecule.Theyworktogetherasoneeffectiveteam.

Commitmenttocuttingedgetechnology:Googlehasconstantlyrefineditssearchenginewith
manymodifications.TheycreatedUniversalSearch,Realtimesearch,andGoogleinstant.
Googleinstantsuggestssearchestotheuserletterbyletterinordertomakethesearchits
fastestyet.

WiseExpansion:Googlehasbranchedoutintootherventuresandacquisitionsovertheyears
thathavebenefittedthesynergyoftheircompany.GoogleNewsisanearlyexampleofwise
expansion.OtherprogramsincludeGoogleEarth,Maps,Analytics,Gmail,andGoogleDocs.

SubtleMarketing:GoogleimplementedGoogledoodlesasawaytopromotetheirbrand
withoutseeminglikeit.ThehomepageisusuallyjustGoogleinitscolorfulletterslikeusual.
However,onholidaysorotherevents,thelettersaredifferentandusuallyhavedrawings
aroundthem.Thesedoodlesdrawquiteabitofattention.

E.Whatnotableaccountingconsiderationsarethereforcompaniesinthisindustry?
OnespecificconcernforGooglewasanemployeesellingsupposedstockoptionsforGoogle
beforetheyevenmadeplansforanIPO,thishappenedabout10yearsago.Infact,someof
thelegalconcernscouldendinlawsuitswhichwouldendupbeingaccountingconcerns.
Googlehasalsohadmanyissueschangingthetermsonitsadvertisingprogramslike
AdSense.

F.Whatlegalorregulatorymattersareofconcern?
Therearemanyarticlesthatshowthemultiplespecificlegalconcernswithcompaniesinthe
searchenginefield.ThemaintopicsforlegalconcernsareAdvertising,Listings,Crawling&
Linking,DomainNames,GovernmentRegulation,Labor,MetaTags,MetaSearch,
Pagejacking,MultimediaSearch,Patents,Privacy&UserInformation,andTrademarks.
http://searchenginewatch.com/article/2067673/SearchEnginesAndLegalIssues#Advertising

G.Whatsocialmattersareofconcern?
SomeofthelegalconcernscanalsobesocialconcernssuchasListings,Privacy&User
Information,andLabor.

5.
A.Isthisafinanciallystrongcompany?
AccordingtoCnetforthesecondyearinarowGooglehasexceeded50billiondollarsin
revenue.Alsotheirfourthquarterearningswere17%higherthanthesameperiodin2012.

B.Whichwayisitmoving?
Googleismovinginapositivedirection.FinanciallythisisoneofGooglesbestyearsever.Its
revenueimproveeachyear.

C.Whatareitssourcesofcapitalandwhatisthevalueofthecompanyscapital?
AsofDecember31,2013,wehad$58.7billionofcash,cashequivalents,andmarketable
securities.Cashequivalentsandmarketablesecuritiesarecomprisedoftimedeposits,money
marketandotherfunds,includingcashcollateralreceivedrelatedtooursecuritieslending
program,highlyliquiddebtinstrumentsoftheU.S.governmentanditsagencies,debt
instrumentsissuedbyforeigngovernments,debtinstrumentsissuedbymunicipalitiesinthe
U.S.,corporatesecurities,mortgagebackedsecuritiesandassetbackedsecurities.


D.Howhasthecapitalmarketplacerespondedtothecompany?
Googlesstockiscurrentlyworth544.94.Inastocksplit,acompanyincreasesthenumberof
sharesoutstandingwhileloweringthepriceaccordingly.Inthisinstance,GooglesClassA
sharesnowtradeundertheGOOGLtickersymbol,whilethenewlycreatedClassCshares
tradeundertheGOOGsymbol.
WSJsRolfeWinklerexplainedtheimplicationsofthesplit:By
holdingsupervotingClassBshares,PageandBrincontrolled56%ofGoogleasoflast
Aprilsproxyfiling.ThefoundershaveseentheirgriperodeovertheyearsasGoogle
continuedtoissueClassAsharestofinanceacquisitionsandpayemployeeswithstock.
EachClassAsharecarriesonevote,whileeachClassBsharecarries10votes.Tosolvethe
problem,GooglecreatedClassCsharesthatarebeingissuedatthebeginningofAprilto
shareholdersofrecordMarch27.Thesehavenovotingrightsand,goingforward,arethe
sharesGoogleintendstoissueforcompensationandacquisitions.Thatwillendthe
slowmotiondilutionforClassBshareholders.

E.Whatisthequalityofearnings
?
Googlehasahighqualityofearnings.Thequalityofearnings,usedinthecontextofsellinga
business,usuallyreferstohowcloseacompany'searningsaretoactualfreecashflow.A
company'searningscanbemuchdifferentthancashflowduetoaccountingpracticessuch
asthedepreciationmethodforassets,thewayinventoryisaccountedfor,workingcapital
requirementstosustainthebusiness,andaccruals.Acompanyisalsoconsideredtohavea
highqualityofearningsifitisabletoinfluencewhethertheseearningsgoupordown.Ifa
companycanimproveitsearningsbygeneratinghigherrevenueordecreasingcosts,andis
lessinfluencedbyexternalevents,thenthiscompanyissaidtohaveahighqualityof
earnings.

F.Howdoesthecompanycomparewiththerestoftheindustry?
Googlesshareofsearchquerieswasup0.6percentinDecemberto67.3percent.Google
rosefrom66.7percentinDecember2012tolastmonths67.3percent.Bingonlygained
onetenthofapercentbetweenNovemberandDecember2013,butitsestimated18.2
percentofallsearchesisanotheralltimehigh.Bingsgainsaremoresubstantial
yearoveryear.Itwentfrom16.3percentinDecember2012to18.2percentlastmonthan
almost12percentgainforthe2013calendaryearYahoos10.8percentinDecemberis
anotheralltimelow.Onthecompanysmostrecentearningscall,CEOMarissaMayer
admittedtheobviousthatYahoossearchshareisfallingandthatthecompanyisbasically
tradingsharewithMicrosoft.

6.
Whatmaterialtypesoftransactionsandtransactioncyclesareinvolved?
Inthepast6months,Googlehashad81insiderpurchasesofitsownstock.Theshares
tradeatoverfivehundreddollarsashare,andtheofficersacquireandsellthesharesonthe
sameday.

b.Whatarehighriskareas?
Sincegooglehashadproblemsinthepast,Ibelievetheirstocktransactionswouldbea
highriskarea.Therearelargeamountsofsharesbeingsoldathighprices.Interviewsshould
beconductedwiththeofficersinvolvedinordertomakesurethatsharesarebeingtraded
fairly.AnotherareatocheckistherevenuestreamfromGooglesadvertisingprograms.
TherehavebeenissuesinthepassedwithGooglechangingtheconditionsonAdSensethat
havecauseddifficultiesforcountries.Googlehadaverylargeendingbalanceforallowance
fordoubtfulaccountsatDecember31,2012.Theamountwas581milliondollarswhichcould
bestatedfairly.However,sinceitssuchalargeamountitcouldbematerial.Googlealsois
knowntogivediscretionarybonusestosomeemployeesbasedonperformance.These
bonusesshouldbeexaminedtodeterminethereasoningforthebonuses.
http://finance.yahoo.com/q/it?s=goog+Insider+Transactions

c.Whatarelowriskareas?

Revenuesincreaseeverysingleyear,howevertheyarentatrisingatanalarmingrateso
theredoesntseemtobeariskthere.Compensationtoofficersisntthathighcomparedto
howmuchtheyreceivedfromsellingtheirownshares.

d.Towhatextentdoyoubelieveitwillbeappropriatetoreducedassessedcontrol
risk?
WebelievethattheinternalcontrolatGoogleisadequatetothepointthattheyhavea
lowlevelofcontrolrisk.Therefore,reductionofcontrolriskisnotnecessary.

e.Howwillauditeffortbeallocatedamonggeographicalareas?
WebelievethatauditeffortwillbeallocatedaccordingtowhereGooglereceivesitsrevenue.
In2013,Googlereceive45%ofitsrevenuefromtheUnitedStates,10%fromtheUnited
Kingdom,andtheremaining45%isfromtherestoftheworld.

f.Whatformofauditorsreportdoyouexpectwillbeissuedwhatdoesitmean?
WeallagreethatGooglewillreceiveastandardreport.Thismeansthattheauditorsgave
Googleanunqualifiedopinionindicatingthattheauditwasadequateinscopeandthe
financialstatements

GoogleInc.
AnalyticalReviewRatios
Preparedby:TheAuditors
ForthePeriodEndedDecember31,2013
Ending
Ending
Ratio
12/31/12
12/31/12

CurrentRatio
4.22%
4.58%
AccountsReceivable
9.15%
8.47%
TotalLiabilities
23.53%
21.29%
Returnontotalassets
12.91%
12.62%
DaysSalesOutstanding
48.42%
51.15%
GrossMargin
58.88%
56.78%
http://financials.morningstar.com/ratios/r.html?t=GOOG

GoogleInc.
AuditStrategy
December31,2013
Date:
PreparedandReviewedby: NaserAbdrabo
6/3/2014
DonnishaBailey
6/3/2014
KorbinCowger
6/3/2014

ObjectivesoftheEngagement
AuditofthefinancialstatementsofGoogleInc.,fortheyearendedDecember31,2013.The
objectistothoroughlyexamineandreviewthefinancialstatementsinordertogiveanopinion
onthecompaniesstatements.

BusinessandIndustryConditions
Googleisaglobaltechnologyleaderfocusedonthewayspeopleaccessinformation.They
aspiretocreateproductandprovideservicesthatdramaticallyimprovethelivesofbillionsof
peopleworldwide.Googlesmissionistoorganizealloftheworldsinformationinorderto
makeituniversallyaccessibleanduseful.Googlesinnovationsinwebsearchandadvertising
havemadethematopinternetpropertywithabrandthatisrecognizedallovertheworld.
Googlesmainsegment(Googlesegment)generatesmostofitsrevenuesthroughthe
deliveryofrelevant,costeffectiveonlineadvertising.TheAdWordandAdSenseprogramsare
usedbybusinessestopromotetheirproductsandserviceswithadvertisingonboth
Googleownedpropertiesandpublisherssitesacrosstheweb.
Themarketforsearchenginewebsitesisextremelycompetitiveindustry.Theirmain
competitionisYahooandMicrosoftsBing.Sincesearchtechnologyisusedbymultiple
businessesontheweb,Googlehasdecidedtobranchoutintoothermarketsusingother

applications.TheseapplicationsincludeGooglePlay,ChromebooksandChrome,
Chromecast,Nexus,andGoogleNow.
WithGooglesacquisitionofMotorolahascausedthemtoenterintothemobiledevice
market.GooglesandroidoperatingsystemisusedfortheMotoroladevicessoldtoday.The
androidsystemcontinuestogrowandhasabilliondevicesactivatedasofSeptember2013.
InJanuary2014,GooglehasenteredintoanagreementwithLenovoGroupLimitedforthe
dispositionoftheMotorolaSegment.Thetransactionisexpectedtoclosein2014.Googlewill
retainthemassmajorityofMotorolasportfolio.

OwnershipandManagement
GooglewasfoundedbyLarryPageandSergeyBrinwhiletheywerePh.D.studentsat
StanfordUniversity.Togethertheyownabout14percentofitssharesbutcontrol56ofthe
stockholdervotingpowerthroughsupervotingstock.TheyincorporatedGoogleasaprivately
heldcompanyonSeptember4,1998.

CEO:LarryPage
ExecutiveChairman:EricE.Schmidt
SeniorVicePresidentandChiefBusinessOfficer:NikeshArora
SeniorVicePresident,CorporateDevelopmentandChiefLegalOfficer:DavidC.Drummond
SeniorVicePresidentandChiefFinancialOfficer:PatrickPichette

Objectives,Strategies,andBusinessRisks
Googlewasabletoincreaseitsrevenuesfrom2012to2013by$9,511milliondollars.This
wasduetotheirplantoincreaseadvertisingrevenues,specificallyadvertisingrevenuesfrom
GoogleNetworkMemberswebsites.Theserevenuesaregeneratedthroughpaidclicks
whichhaveincreased25%from2012to2013.BelowaresomeofthestrategiesGooglewent
throughtoachievethisgoal:
Improvementsinadformatstotomakethemricher
ContinuedglobalexpansionofGooglesexistingproducts
IncreaseinnumberofGoogleNetworkmembers
TheprimarybusinessrisksGooglehasincludes:
Strategiesaboveareoffsetbyadvertisingpolicychanges
Averagecostperclickhasdecreased
Ongoinginvestmentinnewbusinesses,products,services,andtechnologiesisrisky
Googlegenerates91%ofitsrevenuethroughadvertising,losingacustomercould
harmthem
Googlehasdevelopedthefollowingresponsestotheserisks
Googleisconstantlyworkingtocreateinnovativeproductsandservices,tosetthem
apartfromthecompetition.
Improvementsintheabilitytomonetizetraffic.
Providingenduserwithadvertisingmorerelevanttotheirsearchquery

MeasurementandReviewofFinancialPerformance
Managementusesthefollowingmeasurestomonitorthecompanysperformance:
RevenueFluctuations
Abilitytomonetizetrafficontheirwebsites
Amountofpaidclicksonwebsites
Abilitytokeepwebsitesoperational
Performanceisbasedonthehighlyskilledindividualsthatareemployed

ProcedurestoObtainanUnderstandingoftheClientAndItsEnvironment
Ourteamperformedthefollowingprocedurestoupdateourunderstandingogtheclientand
itsenvironment:
Rollforwardofinformationfromprioryearsaudit
Readingofannualreporton10K
Reviewofarticlesfromoutsidesourcesaboutthecompanyandindustry
ExaminationofGoogleswebsiteandinvestorwebsite
Reviewofyearlyperformanceduetogoogleclaimingtheirperformancefluctuates

SignificantRisks
Thereareafewsignificantrisksthatwerenotedasaresultofobtaininginformationon
Googleincluding:
1. Insiderstocktransactionshowofficersacquiringalargenumberofsharesforzero
dollars,andsellingthemthesamedayatanoptimalshareprice.Googlehashad
situationsinthepastwhereemployeesviolatingrulesinvolvingstocksothisshouldbe
examinedthoroughly.Althoughtheincidenthappened10yearsagobeforetheyhad
anIPO,itisstillworkinvestigating.
2. Googlehadalargeendingbalanceinallowancefordoubtfulaccountsof581million
fortheyearendedDecember31,2012.Thiscouldbeacoincidence,buttheamountis
ratherhighsoitshouldbeexaminedthoroughly

SignificantAccountingandAuditingMatters
GooglehasenteredintoatransactionwithLenovo.Thetransactionisforthedispositionof
GooglesMotorolasegment.GoogleplanstohavecontrolofMotorolasportfolio.The
transactionissaidtobeclosedin2014.
Inprioryears,Googlehashadissueswithchangingthepolicyontheiradvertising
programs.Thereportwasnotspecific,butthepoliciesforGooglesadvertisingprograms
shouldbeexaminedinordertoassurethattheyarentviolatinganylaws.Forrecentyears,it
issaidthatGooglehasexperiencedanoffsetinrevenuesfromanotherpolicychange.

PlanningMateriality
Googlehassaidinitsreporton10Kthatitisdifficulttodeterminefutureperformancebased
onpastresults.However,Googlesrevenuesincreasesteadilyoverthelastthreeyears.We

believethatlookingatGoogle'srevenuesandnetincomearethemostappropriatebasisfor
estimatingplanningmaterialityasdescribedbelow:

ComparisonofBasis
ComputationofPlanningMateriality
Financial
Annualizedfor
StatementBasis12/31/13
BaseAmountPercentage
Estimate
Revenues(Total)59,825,000,000Revenue59,825,000,0001%
598,000,000
NetIncome 12,920,000,000 NetIncome12,920,000,0001%
129,200,000

Therangeforplanningmaterialityisfrom129,200,000to598,000,000.Basedonthe
steadygrowthinrevenueandnetincome,wehaveselected300,000,000asamaterial
amount.

7.
Basedondiscussionswiththegroup,allmembersofthegroupdidtheirfairshareofthework.
Weconstructedascheduletomeettwiceaweekinordertodiscussthecompletionofthe
project.Belowarethescheduleddatesformeetingsandplanneddeadlinesforcompletionof
theproject:

4/24/2014-
Team meeting 4:45 to 5:45.
4/25 through 4/27-
studying for midterms.
4/29/2014-
Team meeting 4:45 to 5:45.
5/5/2014-
Completion of items 2 through 4.
5/6/2014-
Team meeting 4:45 to 5:45.
5/8/2014-
Team meeting 4:45 to 5:45
5/13/2014-
Team meeting 4:45 to 5:45. (complete item 5).
5/15/2014-
Team meeting 4:45 to 5:45
5/20/2014-
Team meeting 4:45 to 5:45(complete item 6).
5/22/2014-
Team meeting 4:45 to 5:45
5/27/2014-
Team meeting 4:45 to 5:45 (complete item 7).

5/29/2014-
Team meeting 4:45 to 5:45
6/3/2014-
Team meeting 4:45 to 5:45