For each of the following items, identify if the item increases, decreases, or has no effect on audit risk.For those that do have an effect, specify the component of the audit risk model that was affected.

Description Effect on Audit Risk Component of Audit Risk

1. The company's board of directors does a poor job of overseeing management. Increase Control Risk

2. This is the first year of auditing this client (he company has been previously audited by other auditor

3. Bank reconciliations have not been performed in several years.

4. The company is getting close to violating its debt covenants.

5. The company changed its legal name during the year.

6. The audit firm lost several experienced personnel and replaced them with inexperienced, recent college graduates.

7.The company's products are susceptible to rapid technological change.

8. The company acquired a subsidiary in Costa Rica.

9. The audit firm placed several industry specialists on the audit.

10. The company repaid a floating interest rate loan, and it closed out the related hedge contract.

11. The company went from being publicly held to privately held.

12. The company hired an experienced credit manager (previously, credit decisions were made by the sales department)

13.The company had several key management changes.The auditors have some questions about the integrity of the new key managers.

14. The auditors decided to increase the number of confirmations sent to customers.

15.The client changed advertising agencies during the year.

16.The company is planning to 'go public' in the next several years.

17.The auditor has found numerous problems in previous audits.

18.The company has stopped paying preferred dividends on its stock.

19. While the company has been very profitable in the past, the profits in the current year are below last year.

20.The company keeps large amounts of cash on hand.

21. The company began using a lock box to process cash receipts.

22.The company eliminated its HR department, which previously screened employees.Employment decisions will now be made by individual departments.

23.The company shuts down its plant for two weeks each year, and all employees take vacations at that time.

24.The company is subject to regulatory oversight of the SEC and FDIC.

25.The company engaged in significant related party transactions in the past, but had no such transactions this year.

26.There will be greater supervision on the audit by the manager and partner during the current year.

27.The company has an incredibly complex organizational structure.

28.The production manager (in charge of overseeing the day-to-day operations in the factory) retired.

29.Management is dominated by a single individual.

30.There is a practice by management of committing to analysts and creditors to achieve aggressive earnings targets.

31.The company began investing in derivative investments.

32.The allowance for doubtful accounts is based on significant assumptions by management.

33. The company eliminated its audit committee.

34.The audit program accidentally omitted several necessary audit procedures.

35. While variances from budget have been small in prior year, there were several very large variances in the current year.

36.The company introduced many new products during the current year.