15 Feb Silicon Valley Inc. is a manufacturer of personal handheld electronics. Assume you are getting ready to plan the upcoming 2024 audit for your client. As part of the initial plannin
Silicon Valley Inc. is a manufacturer of personal handheld electronics. Assume you are getting ready to plan the upcoming 2024 audit for your client. As part of the initial planning process, you have gathered the following background information and performed some analytical procedures.
SV has strategically positioned itself to be very price competitive and as a result, sales have increased by 50% over the last two years. At the beginning of the current year, the Board of Directors approved a new compensation structure for all executive and high-level employees which bases bonuses on SV’s sales growth and profit margins. In the fourth quarter of the current year, SV released a new handheld product about four months ahead of schedule so they would be the first to market with new technologies. They still had three months of inventory on hand of the current model at the time of the new model release. The results of analytical procedures performed in planning the audit are on the next page.
Required:
(8 pts) Based upon the information provided, identify four (4) specific risk factors.*
(12 pts) For each of the risk factors identified in part 1, indicate the potential misstatement(s) that may be a concern for the auditor. Explain the connection between the risk factor and the potential misstatement.
* There are many more than four in the background information and the analytical procedure results. No information on controls is provided so do not list any control risks.
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