Top Down Electronics Limited is a designer of high technology healthcare equipment. For the current financial year the CFO of Top Down Electronics Limited reported the following key account balances: (a) Sales Revenue - $111 million; (b) Gross Profit - $65 million; (c) EBIT - $43 million; (d) NOPAT - $5 million; (e) Total Current Assets - $8 million; (f) Total Net PPE - $20 million; (g) Total Assets - $250 million; (h) Total Current Liabilities - $15 million; (i) Total Interest-Bearing Debt - $185 million; and (j) Total Equity $15 million.

Dodgy Auditing Services has been the auditor of Top Down Electronics Limited for the past 4 years and were recently reappointed to audit the financial statements for the current financial year.

Required: Consider the following scenarios independently to determine the type of risk best relevant to the situation description and justify your answer. Provide your answer in the template:

give the type of risk and justification of the 3 scenarios

1-Substantial increases in interest rates during the last 6 months have raised grave concerns about the future financial viability of highly leveraged firms. Firms with poor working capital will be particularly prone to rising short-term interest payments.

2-For many years high start-up costs had ensured the high-tech healthcare industry had remained a duopoly with fixed suppliers. New procedures in last year had led to an increased competitive market. This forced incumbent firms in the industry to introduce new business procedures and processes, logistical lines, and supplier depth. Also, incumbent firms had to adjust to new complex financing options.

3-Following audit committee review recommendations, the CFO decided during the current year to create an internal audit team. All members of the new team had limited internal audit experience and knowledge of the high-tech healthcare industry. A major task of the new team was to revise all credit and billing account approvals and procedures with changes only implemented in the last several weeks with staff still requiring training.