Case 35 Qwest Understanding the Clients Business and Industr

Case 3.5   

Qwest: Understanding the Client\'s Business and Industry

2. Consult Paragraphs 5-8 of PCAOB Auditing Standart No. 8 and Paragraphs 7-10 of PCAOB Auditing Standard no. 12. Based on your understanding of inherent risk assessment and the case information, identify three specific factors about Quest\'s business model that might cause you to elevate inherent risk if you were conducting an audit at Qwest.

Solution

The 3 specific factors that can increase the Inherent Risk :

1 .External Factors : There are various External Environment Factors . There are

2 . Period Misstatements : The company dealings and other financial conditions and modes of strategies used in the previous years give the company a deep understanding on the market conditions. The demand and pricing of the product are also known as per the previous knowledge.The Proactive and the Reactive measures taken by the firm helps them to handlel the risks.

3. Susceptibility to robbery or fraud or theft in the company may cause sudden inherent risks.Financial Statements are generally maintained in Excel sheets. The loss of the information or theft of small inventory items or the missing of a particular folder can cause huge losses to the firm and make a bad impression on the Goodwill of the company.

The 4 Steps in Assessment of Risks.