PepsiCo. case study

PepsiCo is a world leader in convenience foods and drinks, with more than 157,000 employees and 2005 revenues of more than $32 billion. With headquarters in Purchase, New York, the company consists of Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International and Quaker Foods North America. Our full-scope Audit work for PepsiCo starts in March and is completed in mid-February of the following year. We also perform three SAS 100 reviews of interim financials and undertake one-off tasks, for example, helping PepsiCo adopt the Statement of Financial Standards (SFAS) 123R in the first quarter of 2006.

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Diageo

Our firms' response to these challenges is a powerful combination of careful planning, attention to detail and good global teamwork between the audit engagement team at PepsiCo's headquarters and the audit engagement team based on site at each Pepsi division.

The process starts when KPMG's Pepsi Engagement team holds the annual planning meeting to discuss their audit strategy for the year ahead. The core audit team consists of three partners, a manager and a senior associate. During each of the three quarterly reviews and during the months preceding the year-end audit, the team increases in size to accommodate the increased workload. In addition to the audit team, the engagement team also consists of KPMG firms' professionals specializing in pensions, actuary work, taxes, and technology.

We divide up work according to the level of difficulty of the process or audit testwork in question. For example, Sonja, now a senior associate, works on the executive compensation, sharepower and tax processes as well as getting involved with cash flow, derivatives and reserves testwork. She joined the team in 2004, a month after starting work at KPMG, and was immediately struck by the advantages of working on a large engagement.

"It's proved a great training ground for me," she says. "The seniors, managers and partners that I have worked with have acted as mentors and role-models, helping me improve my overall business skills as well as increase my technical knowledge."

"It's also given me considerable networking opportunities. For example, in my first year, I was asked to coordinate budgeting hours, fees and independence affidavits from people all over the world."

The partners regularly meet with the PepsiCo CEO, CFO, Controller and other key executives to update them on how the audit is progressing and let them know our opinion of the financial information provided to us. They also offer guidance to other staff, reviewing the workpapers of the manager and other staff to make sure that all significant amounts have been tested and documented thoroughly.

The manager oversees the work done by the other staff, helping the senior associate with technical and general audit questions that arise. They make sure the team meets the necessary deadlines and review workpapers in advance of the partners, highlighting where additional testwork needs to be done or where more thorough documentation is needed.

A first year graduate recruit would learn the reporting process and get involved in testing audit levels such as EPS, debit, contingent liabilities and cash. Second year members might get involved in the Treasury process and work on audit areas such as stock compensation, casualty insurance, journal entries and analyticals.