Chapter 9, Problem 47RSCQ

To determine

Introduction:The risk associated with the overall operations of a business entity is called as the potential risk. It is the risk of undesirable outcomes resulting from the hazards. So an auditor as a consultant is required for risk management, who recommend some business strategy and necessary changes.

Requirement 1

Potential risk areas and the cause they represent potential risks

To determine

Introduction: The risk associated with the overall operations of a business entity is called as the potential risk. It is the risk of undesirable outcomes resulting from the hazards. So an auditor as a consultant is required for risk management, who recommend some business strategy and necessary changes.

Requirement 2

The possible explanations for representing potential risk

To determine

Introduction:To determine the quality of financial information that are provided by the clients, audit procedures are used by the auditors. By using different procedures, the auditor’s express their opinion. For this procedure, the auditor requires enough information.

Requirement 3

the accuracy of client’s data in Audit procedures

To determine

Introduction:In business practice, sometimes there may be involve altering accounts receivables to embezzlement of cash. To conceal such amount is a fraudulent activity known as lapping scheme. This method involves considering subsequent receivables payment from a transaction and uses that to cover the embezzlement of cash.

Requirement 4

the way that the CFO use accounts receivable and inventory

To determine

Introduction: Professional skepticism is a foundation of auditing profession. It always uses validate information through critical assessment of evidence. This skepticism must be applied at each stages of audit process.

Requirement 5

The importance of professional skepticism during performing planning analytical procedures