Inherent Risk Essay

i) expanded into a national manufacturer of tall technology sustainable energy products brings with it a range of uncertainties, including compliance requirements and logistical problems increased potential for misstatement out-of-pocket to the judgements required requiring more judgement such as research and development (valuation), intangible assets (valuation), inventory (valuation) and attribute plant and equipment (valuation).ii) assets include intellectual property rights potential for misstatement when valuing advanced technology and intangible assets because of their nature reason property rights (valuation).iii) Nature of the clients business a high technology industry extremely susceptible to change in technology makes valuation of inventory and property plant and equipment more tall(prenominal) misstatements Inventory (valuation) intangible assets (e.g. intellectual property rights) (valuation) property plant and equipment (valuation).iv) new management team, no ens ure in the high technology industries difficult to exercise appropriate judgement misstatement Sales (occurrence) accounts receivable/ preparedness for doubtful debts (valuation)inventory (valuation) intellectual property rights (valuation).v) Management remuneration is based on bonuses paid on reported profit engage in earnings management. For example, sales may be recognised preliminary than they should, or cookings, such as for doubtful debts, may be underestimated Sales (occurrence/cut off) accounts receivable/ provision for doubtful debts (valuation) research and development (valuation)vi) New information system Risk of losing data in changeover. Also, supply will not be familiar with the new system, therefore susceptible to more errors Any operative account when changing over to the new system. Completeness due to loss of data occurrence due to retroflex inputting accuracy due to human error.ANSWER Internal control weakness Internal control improvements separate depar tments can raise requisitions for goods and function without proper authorisation. Pre-numbered requisitions orders should be raised and signed by authorised personnel. Requisitioning countenance should be related to authority and function. A signed requisition order is necessary before face lifting purchase orders. Purchase orders are unnumbered and unaccounted for. Pre-numbered purchase orders should be signed by an authorised get department staff member and a copy forward to the requisitioner, goods receiving and accounts departments. Pre-numbered purchase orders should ensure completeness. Purchasing dept obtains goods and services as soon as the requisition is received. Orders should be placed with approved suppliers on the best legal injury and quality. dope purchase orders are accessible to all purchasing staff and open to theft and misappropriation. Blank purchase orders should be kept in a secure place to avoid misuse and should be accounted for that is, checke d for sequential continuity.