Question
CBA GENERAL RISK MANAGEMENT QUESTIONNAIRE Requirement: Complete the questionnaire. Some questions have been pre-answered. They are marked as underlined. Assume you are the staff auditor
CBA GENERAL RISK MANAGEMENT QUESTIONNAIRE Requirement: Complete the questionnaire. Some questions have been pre-answered. They are marked as underlined. Assume you are the staff auditor and complete the questionnaire. Next, make your risk assessment for each category as, low, moderate or high. You will need to review CBAs financial statements, notes to the statements and other information provided. Finally, provide an overall business risk assessment for CBA. If a question is not answered it is your responsibility to evaluate it. Your justification should be divided into the five categories and questions in each category. You should label each category and question. Make your answers brief and concise. Requirement A. Use the following format: Category/Question Number Conclusion Source/Basis for Your Conclusio Requirement B. Using the following format evaluate each category
1.External Factors Industry Economic and Financial Conditions Assessment is:
2.Uses and Users of Financial Statements Assessment is: Internal Factors
3.Managements Integrity Entity Assessment is:
4.Entity Organization Assessment is:
5.Financial Condition Assessment is:
6.Nature of Transactions Assessment is:
Requirement C. Evaluate the overall business risk of CBA. How does your valuation affect your client acceptance decision?
USing the question on General Risk Management Questionnaire below EXTERNAL FACTORS General Economic and Financial Conditions Industry Economic and Financial Conditions 1. Are the products of this industry subject to rapid obsolescence? Y N Unknown 2. Is the industry highly competitive? Y N Unknown 3. Have there been an unusual number of bankruptcies in this industry? Y N Unknown 4. Does the estimated income for the year deviate significantly from the industry? Y N Unknown 5. Did the industry experience a strike or other labor unrest? Y N Unknown
Uses and Users of Financial Statements 1. Will the financial statements be filed with the Securities and Exchange Commission? Y N Unknown 2. Will the financial statements be submitted to the clients bank? Y N Unknown 3. Will the financial statements be submitted to credit agencies? Y N Unknown 4. Will the financial statements be submitted to stockholders? Y N Unknown 5. Will the financial statements be submitted to employees with reference to: Profit-sharing plans? Y N Unknown Pension plans? Y N Unknown Bonus arrangements? Y N Unknown Other compensation arrangements? Y N Unknown 6. Will the financial statements be used in connection with negotiations relating to an acquisition or a disposal of a business or a segment of a business? Y N Unknown 7. Will the financial statements be used in connection with negotiations for: A loan? Y N Unknown Private sale of stock? Y N Unknown 8. Are there other uses or users of these financial statements which may affect our risk? Y N Unknown If so, list. INTERNAL FACTORS Managements Integrity 1. Are there any indications that management may lack integrity? Y N Unknown 2. Does management desire favorable earnings because of the following: Need to meet forecasts? Y N Unknown Need to support price of the entitys stock? Y N Unknown Existence of management profit-sharing agreements? Y N Unknown
3. Does management desire low earnings to reduce income taxes? Y N Unknown 4. Is management dominated by one or a few individuals? Y N Unknown 5. Does management have a poor reputation in the industry? Y N Unknown 6. Does management have a reputation for taking unusual or unnecessary risks? Y N Unknown 7. Has there been considerable turnover in senior management positions? Y N Unknown 8. Are there other characteristics of management personnel that may affect our risk? Y N Unknown If so, list. Entity Organization 1. Does the entity lack an audit committee? Y N Unknown 2. Does the entity fail to document its accounting system? Y N Unknown 3. Does the entity fail to use internal auditors? Y N Unknown 4. Do internal auditors, if any, not report to the audit committee or some other high organizational level of the entity? Y N Unknown 5. Is the organization owner- or manager-dominated? Y N Unknown 6. Does the entity fail to document job requirements? Y N Unknown 7. Does management lack an understanding of accounting and administrative controls? Y N Unknown 8. Does management fail to implement accounting and administrative controls? Y N Unknown 9. Has management failed to correct material weaknesses in internal accounting control that can be corrected? Y N Unknown 10. Are the entitys records generated to a significant degree by an EDP system? Y N Unknown
11. Does the entity fail to maintain perpetual records of: Inventories? Y N Unknown Long-lived assets? Y N Unknown Investments? Y N Unknown 12. If the entity maintains perpetual records, does it periodically compare them with physical counts? Y N Unknown 13. Does management fail to communicate to other personnel a commitment to control? Y N Unknown 14. Does the entity fail to maintain policy and procedures manuals? Y N Unknown 15. Is there a high turnover of accounting and finance personnel? Y N Unknown 16. Has the client recently changed auditors or attorneys? Y N Unknown 17. Does a hostile relationship exist between our staff and management? Y N Unknown 18. Has the client recently organized or acquired a subsidiary? Y N Unknown
Financial Condition of Entity 1. Does the entity have insufficient working capital? Y N Unknown 2. Does the entity have sufficient lines of credit? Y N Unknown 3. Does the entity depend on relatively few customers? Y N Unknown 4. Does the entity depend on relatively few suppliers? Y N Unknown 5. Are there violations of debt covenants? Y N Unknown 6. Has the entity recently experienced a significant period of losses? Y N Unknown 7. Is the entity using short-term obligations to finance long-term projects? Y N Unknown 8. Does the entity have excess productive capacity? Y N Unknown 9. Does the entity have high fixed costs? Y N Unknown
10. Has the entity experienced rapid expansion? Y N Unknown 11. Does the entity have a significantly long operating cycle? Y N Unknown 12. Does the entity have significant contingent liabilities? Y N Unknown 13. Is the entity the defendant in any significant litigation? Y N Unknown 14. Do major valuation problems exist, such as: Allowance for doubtful accounts? Y N Unknown Inventories? Y N Unknown Investments? Y N Unknown Long-term construction contracts? Y N Unknown 15. Has the client experienced severe losses from investments or joint ventures? Y N Unknown Nature of Transactions 1. Does the entity engage in a significant number of consignment purchases or sales? Y N Unknown 2. Does the entity engage in significant cash transactions? Y N Unknown 3. Does the entity engage in significant related-party transactions? Y N Unknown 4. Has the entity engaged in significant unusual transactions during the year or near the end of the year? Y N Unknown 5. Are there any questions on the timing of revenue recognition? Y N Unknown
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