(Developing responses to assessed risks) Your client, General Television, Inc. manufactures

televisions and during the current year acquired Micro Engineering, Inc., which manufactured

flat panel plasma screens for computers so that it could compete in the market

for flat panel televisions. Following is a list of several risks that have been identified in the

audit of this television manufacturer.

1. General Television has strong internal controls over the existence of inventory. It has a

good perpetual inventory system and regularly compares inventory on hand with the

perpetual records.

2. Prices have been changing rapidly in General Television