Risk Analysis. Four tasks are required to assess the risk of misstatement. They are:

1 Identify risk by developing an understanding of the entity and its environment.

2 Relate the risk to what could go wrong in management’s assertion.

3 Determine whether risks could result in material misstatement of the financial statements.

4 Consider that risks will result in material misstatement.

Required:

Using these tasks, analyze the following risks:

A. Cash receipts from sales in an office supply store are not recorded.

B. Investment in securities by the treasury department of a small manufacturing firm result in large losses.

C. Financial statement disclosures do not comply with IASs.

D. Pollution equipment in a large international steel refinery does not comply with local pollution control laws.

E. Bank statements do not correlate with cash receipts and disbursements.