Assessing Risk at Niko Resources Refer to Auditing in Action 6-3 .
a. Based upon the facts presented related to Niko, explain how they impact the risk of material misstatement. Explain if it has an overall impact on financial reporting risk and identify the related account balances and/or disclosure. In addition, identify the relevant assertion(s) and state why that particular assertion(s) is relevant.
b. In its 2014 annual report, Niko highlighted its restructuring plans. For the two events below, explain how they impact the risk of material misstatement-consider overall financial reporting risk as well as specific accounts and/or disclosures. For each account/disclosure, identify the relevant assertion(s) and state why that particular assertion(s) is relevant.
Suspension of Exploration Activities Outside of India
Exploration efforts ceased in Indonesia, Trinidad, Madagascar, and Brazil, with drilling and technical staffing reduced significantly. Activities in these countries are now focussed on farm-outs and/or sales of working interests along with extensions of drilling obligations or modifications of terms. In addition, the company initiated discussions with its vendors in Indonesia and Trinidad toward settlement of the payables accrued from its drilling programs
Expansion of the Board of Directors
Four new independent directors joined the board, bringing expertise and in-depth experience in corporate turnarounds and rebuilding, and the board formed a special restructuring committee to directly oversee the company's restructuring efforts.
c. Based upon Niko's restructuring plans, explain how the auditor would adjust the overall audit strategy.