3air_im13 - 65 CHAPTER 13 A Strategic Systems Approach to...

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CHAPTER 13 A Strategic Systems Approach to the Financial Audit LEARNING OBJECTIVES Review Checkpoints Cases 1. Describe the concept of business risk. 1 Sleeman Breweries Ltd. comprehensive case 2. Discussion how the PA gains his/her understanding of business risk through strategic analysis and business process analysis. 2, 3 Sleeman Breweries Ltd. comprehensive case 3. Describe the types of risk assessment and reduction procedures carried out by an SSA auditor. 4 Sleeman Breweries Ltd. comprehensive case 4. Explain how the PA links business risk to audit risk and the nature of the audit evidence acquired. 5, 6, 7 Sleeman Breweries Ltd. comprehensive case 5. Relate analysis of business performance to the financial statements. 8, 9, 10, 11, 12 Sleeman Breweries Ltd. comprehensive case 6. Describe how a SSA audit complies with GAAS (generally accepted auditing standards). 7 POWERPOINT SLIDES PowerPoint slides are included on the website. Please take special note of: * Initial Risk Assessment * Reassessed Risk Assessment SOLUTIONS FOR REVIEW CHECKPOINTS 13. 1 Business risk is the client risk that the client will be unable to achieve its business objectives or execute its strategies. An example of a business that has recently (2000) affected the airline industry in Canada is the controversial merger between Air Canada and Canadian Airlines. There have been widely perceived and reported declines in customer services immediately after the merger. This has created new business risks for Air Canada in the form of tightened regulations on liabilities to passengers for losses from delays or cancellations of seat space, and threatened legislation to lessen the restrictions on charter, regional, and even foreign airlines so as to increase competition on the most lucrative routes. 65
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66 13.2 The two parts of business analysis are strategic analysis and business process analysis. The goal is to learn about the client’s analysis of the risks its business faces, in particular, whether the analysis identifies all material business risks. 13.3 This is part of the business analysis discussed in 13.2. Senior client management is the chief source of information about the client’s business strategy. Auditor’s knowledge of the business (e.g., from previous audits of clients in the same or similar industries) is the key to understanding the risks associated with a particular client’s business strategy. Common risks associated with a client’s strategy are risks of cost leadership, risks of differentiation, and risks of focus. These are discussed in the chapter appendix. 13.4 The purpose of business process analysis is to identify the system to assure adherence to the business strategy. The auditor must understand the process and identify key sub-processes to examine in detail these key sub-processes, inherent business risk associated with the sub-process, and the control environment associated with the sub-process. The information the auditor seeks to learn about a target business process are the following: process
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This note was uploaded on 02/08/2012 for the course IAF IAF520 taught by Professor Aldcorn during the Winter '08 term at Seneca.

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3air_im13 - 65 CHAPTER 13 A Strategic Systems Approach to...

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