or each of the following independent situations, select the appropriate inherent risk factor described and the effect the inherent ris rould have on the company's net income: A. Sales orders for the textbook distributor have increased 100% over the last year. Additionally, the commany's inventory turnover doubled since the previous period. Gold Miner, Inc. has gold mines in a number of states. To hedge the price of the gold inventory, Gold Miner purchased gold futures contracts. The fair value of gold has declined significantly in the last few months. - 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. Joe's Computers provides three-year money-backed warranties on all laptops. During year 1, warranty claims decreased significantly and the company has not reduced the warranty reserve. 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. Industry circumstances/No effect B. Estimates/Overstatement of NI C. Complexity/Overstatement of NI D. Industry circumstances/Overstatement of NI E. Complexity/Understatement of statement of NI F. Estimates/No effect on NI G. Complexity/No effect on NI H. Volume/No effect on NI 1. Industry circumstances/Understatement of NI Susceptibility of asset to theft/Overstatement of NI K. Susceptibility of asset to theft/No effect on NI L. Volume/Understatement of NI M.Estimates/Understatement of NI N. Susceptibility of asset to theft/Understatement of NI 0. Volume/Overstatement of NI TION 16 or each of the following independent situations, select the appropriate inherent risk factor described and the effect the inherent ris rould have on the company's net income: A. Sales orders for the textbook distributor have increased 100% over the last year. Additionally, the commany's inventory turnover doubled since the previous period. Gold Miner, Inc. has gold mines in a number of states. To hedge the price of the gold inventory, Gold Miner purchased gold futures contracts. The fair value of gold has declined significantly in the last few months. - 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. Joe's Computers provides three-year money-backed warranties on all laptops. During year 1, warranty claims decreased significantly and the company has not reduced the warranty reserve. 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. Industry circumstances/No effect B. Estimates/Overstatement of NI C. Complexity/Overstatement of NI D. Industry circumstances/Overstatement of NI E. Complexity/Understatement of statement of NI F. Estimates/No effect on NI G. Complexity/No effect on NI H. Volume/No effect on NI 1. Industry circumstances/Understatement of NI Susceptibility of asset to theft/Overstatement of NI K. Susceptibility of asset to theft/No effect on NI L. Volume/Understatement of NI M.Estimates/Understatement of NI N. Susceptibility of asset to theft/Understatement of NI 0. Volume/Overstatement of NI TION 16
