Pinnacle case study part ii Essay

The company is privately held, yet there is a large issue forth of debt, so the monetary statement -may be engagementd extensively. Also, management is considering selling the Machine-Tech division, which has the authorisation to result in extensive use of the statement by buyers. 2. Item 6 in the planning phase indicates plans for redundant debt backing. Likelihood of financing difficulties1. The solar position engine business revolves around ever-changing technology, therefore making it inherently more than attempty than other business, with a f exclusively apart chance of bankruptcy. The outset item in the planning issues raises a carry on roughly the viability of the division, provided non the entire company. 2. lift off 1 of the case was that the likelihood of financial failure is low, even with the issues of the company. 3. Item 9 in the planning phase gather ups a current ratio of 2.0 and if fall at a lower place that, this could result in the loan world ca lled. Management integrityNo study issues exist that would cause the scrutinizeor to straits the integrity of the management. However, canvasor should have through client acceptance procedure before accepting the client. at that place are a few factors in which fraudulent financing reporting may occur. b. Acceptable audit insecurity is medium to low because of the factors listed in part (a) and the planned increase in financing and the potential violation of the debt agreement agreement. This might be low because this is the first year audit. c.1. constituent(a) fortune No put up on inherent risk2. intrinsical risk The primary concern is the possibility of obsolete farm animal, which tints the valuation of inventory at the lower of address or market. describe Affected Inventory, cost of goods exchange analyze Objectives Transaction-related3. Inherent Risk There is potential related party dealings, which could  be active the valuation of the deed, which could affect the valuation of the proceeding and may necessitate disclosure as a related party transaction. reckon stirred Manufacturing equipment, footnote study objectives Transaction-related, intromission and disclosure-related4. Inherent Risk This involves a nonroutine transaction where there is a risk that materials, labor, and overhead are incorrectly applied to the plaza accounts. nib affected Property accounts, inventory, cost of good sold Audit objectives balance-related5. Inherent Risk There may be a major collection bother with outstanding receivables of 15% from a customer for several months. This could result in an understatement of the modification for uncollectible accounts. Account affected Account receivable, bad debt cost, and allowance for uncollectible accounts. Audit objectives balance-related6. Inherent Risk No effect on inherent risk7. Inherent Risk There may be a related party transaction, which could affect valuation of the transaction and may require disclosure. Account affected Account payable, Repairs expenseAudit objectives Transaction-related8. Inherent Risk This does not affect inherent risk directly, but it is possible that the turnover of internal audit personnel could increase the risk of fraudulent financial reporting. The turnover may excessively affect the auditors discernment of control risk. Account affected exclusively accountsAudit objectives transaction, balance, presentation and disclosure-related9. Inherent Risk In addition to affecting AAR, the auditor should be concerned about the risk of fraudulent financial reporting overdue to incentive to make certain that all debt covenants have been met. Account affected either accountsAudit objectives transaction, balance, presentation and disclosure-related10. Inherent Risk An ongoing dispute with the IRS might require adjustment to income tax liability or a disclosure in footnotes for a contingency, depending on the status of the dispute. Account affected Inc ome tax expense and income tax payableAudit objectives balance-related11. Inherent risk This particular involves related party transaction because this transaction was not conducted with an outside party. It is possible that the related receivable and payable might not have been properly eliminated on peaks consolidated financial statements. Account affected Notes payable, notes receivable, interest expense, and interest income. Audit objectives Transaction and balance-related