Oceanview Marine Company 2-5-b Identification of Significant Risks of Material Misstatement (continued) December 31, 2015 Account: Current Unadjusted Balance: Prior Year's Audited Balance: Inventory $13, 524, 349 $ 12, 356 400 Nature of potential material misstatement: The account could include either inventory carried over from the pet year or returns not taken into account Does the risk of material misstatement represent a fraud risk? Explain. Yes, as increases to this account ave significant for auditing standards require this to be labeled as fraud Audit procedure to be performed to address identified risk (be specific): 1 . A cutoff analysis for the inventory of the current year. 2 . Test- high value items in inventory 3. Review freight casts Account: accounts Receivable Current Unadjusted Balance: Prior Year's Audited Balance: $ 1, 762, 642 $ 1, 401,229 Nature of potential material misstatement: 1. Potentiall uncollected amounts not recognized 2, Orders accepted prom customers with poor credit 3 Misevaluation off cutoff for year end Does this risk of material misstatement represent a fraud risk? Explain. yes, as increase to this account should be considered possible Avolun Audit procedure to be performed to address identified risk (be specific): I . trace receivables reports to general ledger 2. test invoices listed in receivable report