Monday, March 18, 2019

Industry and Corporate Risk :: essays research papers

IntroductionOrganizations today face several business assays that hobo hasten an effect on their financial statements. The audited account happen model is a tool that auditors use to help identify those run a risk of exposures. To better understand how the audit risk model can help identify risks, we will meet how the model can be use to the Coca-Cola Corporation and the limitations of using the model.Components of the toughieThe audit risk model is composed of the equation, audit risk (AR) equals inherent risk (IR) times control risk (CR) times detection risk (DR). Audit risk is the risk that the auditor may fail to characterise their opinion on misstatements in the financial statements. Inherent risk is the risk of an assertion being made on material misstatements, assuming that in that location is no problem with related internal controls. Control risk is the risk that material misstatements could occur in an assertion that are not detect or prevented by the existing i nternal controls. Detection risk is the risk that the auditor will not detect a material misstatement in the assertion (Messier, 2003, pg. 94). In the process of assessing the auditee risk, the auditor must determine the entitys business risk. This can be done by evaluating the nature of the entity, industry, regulatory, and former(a) external factors, management, governance, objective and strategies, measurement and performance, and business processes (Messier, 2003, pg. 98).Examples of possible business risks can be found in the Coca-Cola Corporation. Coca-Cola faces different regulatory practices since it has operations in countries outside of the United States. These operations include North America, Africa, Asia, Europe, Eurasia, and Middle East, and Latin America. Another business risk for Coca-Cola is that the nature of the business can be seasonal. The demand for the product can fluctuate from one location to other and may fluctuate over time within a private location. Coc a-Cola also acquired ownership or licensing rights to products in Croatia, Argentina, Mexico, and Bahrain in 2004, which create crude business risks. The company also uses two different units of measurement to fig sales. The measurements are gallons and cases of finished products. The difference in measurement can commence errors in measurement, therefore possibly creating another business risk (Coca-Cola, swear out 4, 2005, pg. 2, 4).Applying the ModelThe use of the audit risk model should be applied at the account balance or class of transaction train. thither are three steps to applying the model, the steps include setting a planned level of audit risk, determining inherent and control risk, and understand the risk equation in order to determine the appropriate level of detection risk (Messier, 2003, pg.

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