Risk Factors Relating to Industry Conditions - Risk Management Assignment Help

Assignment Task

Risk Factors relating to industry conditions
New accounting, statutory, or regulatory requirements that could impair the financial stability or profitability of the entity
High degree of competition or market saturation, accompanied by declining margins
Declining industry with increasing business failures and significant decline in customer demand
Rapid change in the industry, such as high vulnerability to rapidly changing technology or rapid product obsolescence
 

Risk Factors relating to operating characteristics and financial stability
Inability to generate cash flows from operations while reporting earnings and earnings growth
Significant pressure to obtain additional funds to finance for example expansion
Significant related party transactions not in the ordinary course of business or with related entities not audited or audited by another firm
Unusually rapid growth or profitability, especially compared with that of other companies in the industry
Unrealistically aggressive sales or profitability incentive programmes
Threat of imminent bankruptcy or foreclosure, or hostile takeover
 

Risk Factors relating to management
A significant portion of management’s compensation is represented by bonuses, stock options or other incentives, the value of which is contingent upon the entity achieving unduly aggressive targets for operating results, financial position, or cash flow
Management setting unduly aggressive financial targets and expectations for operating personnel
Management continuing to employ an ineffective accounting, information technology or internal audit staff
Domineering management behaviour in dealing with the auditor, especially involving attempts to influence the scope of the auditor’s work
Formal or informal restrictions on the auditor that inappropriately limit his or her access to people or information or his or her ability to communicate effectively with the board of directors or audit committee

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