Nature of the Entity. To get information about the core processes of the entity an auditor examines its business operations, investments, capital structure and financing activities, and financial reporting policies.

Required:

A. Explain the problems an auditor may incur in each of these four areas.

B. What would be the characteristics of a company that had low risk in each of these areas?

C. You are assigned to evaluate on general economic and industry characteristics Eikon Elektronik, AS, a small, but fast-growing Turkish company that manufactures chip memories for personal computers. What business operations, investments, capital structure and financing activities, and financial reporting policies factors do you believe will be important in this evaluation?