Strategic Business Risk Assessment One.Tel Australia †Free Samples

Question: List and discuss several factors that would have contributed to an increased inherent risk assessment at the financial report level. Also identify which of these factors may be identified during the strategic business risk assessment? Answer: There are various factors that have contributed to the overall increase in the inherent risk associated with the reporting at the financial level. The risk increased because of many factors like increase in market competition, reduction in the overall prices of the services, and the exchange rates violates. As the smaller companies will try to penetrate the market of telecommunication it will affect the overall standing of the company and the profitability index of the company. It increases the overall risks that are associated with the lower level of revenues. Basically in case the competition increases the customers will have more choices from the different variety of services, hence in that case the overall price that are offered by the company will also get hampered. Thus there is an increase in the inherent risk at the financial statement level because there is a decline in the overall revenue because of the increase in the risks. Since the operations of a company are widespread in so many countries starting from as Australia, UK, France, Netherlands and Hong Kong among others, the company faces the risk of fluctuations in the exchange rates between the countries. The inherent risk is that the exchange rate might affect the overall foreign sales of these countries. These may lead to low exchange losses being reported in the financial statements. There is also an inherent risk that is associated with abnormal items and losses associated with the same. (O'Keefe, T.B., Simunic, D.A. and Stein, M.T., 1994) The main risk factor may be associated with strategy formulation, and the overall business risk associated with the entry of new players in the market and increment in the risk associated with increased level of competition and also changes in the overall exchange rates and its fluctuation that may be resulted from violates and operations between the various countries that may be involved in the same. When we conduct a SWOT analysis, based on the principles of as Porters Five Forces analysis and also on the internal and external analysis of the overall environment. In case of abnormal items the companies faces a lot of problem because their occurrence is uncertain and also the level of risk associated with the same may be difficult to obtain. In order to ascertain these abnormal items, the company needs to carry on with the audit of the financial statements so inherent risks associated with the abnormal losses may be indentified and can be properly reported. This audit of financial s tatements will help the company inserting with the risk associated with the financial statements and also helps in reducing the level of such inherent risks. In relation with the other factors associated with the foreign exchange volatilities, the company may conduct a review of the overall work done by the company, and with the exchange rates of the various operation done in the different countries to ascertain the overall fluctuation loss that might be associated with the same. Then it may enter the hedging positions which may entered by the company that were exchange rate volatilities.( Eilifsen, A., Knechel, W.R. and Wallage, P., 2001) One of the main risk that might be associated with a company at the account level, might be the overall susceptibility of frauds.. Frauds may occur if the management of the company fails to establish proper control in the company and in the maintenance and operations of the financial statements and the assertion of the overall account balance with respect to the company. In the given company, most of the customers are paying in cash and cash equivalents. A review of the cash flow statements indicates the overall flow of cash from the various operating activities of the company. ( Inherent risk assessment and audit firm technology: A contrast in world theories. Accounting, Organizations and Society, 16(1), pp.61-90) It exposes the company to various risks of fraud because cash can be easily stolen by the employees and also that will cause lose to the company. This is one of the major risks that are associated with the company at the inherited level of the company at the accounts balance. The company has taken huge amount of loans; hence the company suffers from the inherent risk of paying interest on high payments from various borrowings. The payments of interest are a factor of risks because it asserts outflow of cash from the company. These are few of the risk that is associated with the overall inherent risk at the accounts level of the company. There is also a risk of the accounts not being audited properly because of which the overall inherited risk that is caused to non-discovery of misstatements in the books of accounts by the auditor. It is important the management established efficient control so that accounts are prepared properly and no risk is associated with the same. (Houston, R.W. , Peters, M.F. and Pratt, J.H., 1999) If we do a proper analysis, we can say that going concern of the company can be accessed as a low one. The main factors on which this outcome is based is the overall decline in the operating profit of the company both parent and the subsidiary company between the financial periods between 1999 and 2000. The overall operating profit has been decreasing at an alarming rate, such decrease shows that there is a decline in the going concern of the company, and the company may not have sufficient funds in the future to keep its operation going. The operating profit of the parent entity declined from an operating profit of $ 7.9 million in 1999 to a loss of $ 78.2 million in 2000 while the operating profit of the consolidated entity declined from $ 7.0 million in 1999 to a loss of $ 291.1 million in 2000. This sharp decline is great risks to the company and puts a huge question mark on the overall going concern assumption of the company. In case of retained profit also there has been a shar p decline for the parent entity from $ 9.6 million to accumulate losses of $ 68.7 million, while there has been decline in the retained profit of the subsidiary company from $ 9.1 million in 1999 to accumulated losses of $ 282.1 million, which indicates that the company is not having the required amount of funds to carry its operation and also puts a question mark on the ability of the shareholder and the future of the investors of the company , all this has largely affected the going concern ability of the company , making it to be seen as a low level of certainty for the company to continue its operations. (Brumfield, C.A., Elliott, R.K. and Jacobson, P.D., 1983.) The overall decline in the financial results of the company also indicates a decline in the popularity of the company and that of the companys products. It shows how the company is losing its stand in the society and thus that is hampering the overall credibility of the company to a large extent. The ability of the company to offer its products in the future is low, and that does affect the going concern assumption of the company to large extent. If the company wants to prosper and to save itself from this situation, it need to focus on better development of controls, so that the overall risk may be diminished, reduction in risks will lead to reduction in the overall losses of the company. And the company will grow and prosper. (Hogan, C.E. and Wilkins, M.S., 2008) References: Evidence on the audit risk model: Do auditors increase audit fees in the presence of internal control deficiencies?. Contemporary Accounting Research, 25(1), pp.219-242. The audit risk model, business risk and audit-planning decisions. The Accounting Review, 74(3), pp.281-298. Application of the business risk audit model: A field study. Accounting Horizons, 15(3), pp.193-207. The production of audit services: Evidence from a major public accounting firm. Journal of Accounting Research, pp.241-261. Business risk and the audit process. Journal of Accountancy, 155(4), pp.60-68