For each independent situation below, doubleclick the associated shaded cell and select from the list provided the appropriate inherent risk factor(see the list at end) and the effect of inherent risk, if any, on the company's net income. A selection may be used once, more than once, or not at all.

Situation	Inherent Risk Factor	The Effect of Inherent Risk on the Company's Net Income
1. Sales orders for an Internet textbook distributor have increased 100% over the last year. Additionally, the company's asset turnover has doubled since the previous year.
2. JRM Co. recorded its first hedging transaction for mortgagebacked securities in Year 1. At the end of Year 1, the fair value of mortgagebacked securities had decreased significantly.
3. Metal, Inc. supplies copper pipes to home builders. During Year 1, copper prices doubled. At any given time, a significant amount of inventory is in transit or located at job sites.
4. Joe's Computers provides threeyear money back warranties on all laptops. During Year 1, warranty claims decreased signficantly and the company has not reduced the warranty reserve.
5. Global Co. imports most of its products from a foreign supplier. During Year 1, a new technology made part of the Global Co. inventory obsolete. Inherent risk factor(Complexity, Estimates, Industry circumstances, other external circumstances, susceptibility of asset theft, volume) Net Effect( Overstatement, understament or not impact)