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objectives. (Lesson 4)
Samson Powder – Risks and Audit CriteriaFollowing is an outline of the issues that could be included in the report. A sample report is provided in good form after the outline.a.Risks•Risk that the transfer of production to South America may cause problems with the local governments and ecological groups•Risk that outsource vendors may use Samson’s technology for their own production•Risk related to labour relations due to the shutdown in Canada•Risk that manufacturing costs will increase•Risk related to transportation activities-Currency riskCategory/issuescontrollabilityRisk wkness will occurImpact of weaknessTotalCOSO-Reporting:Currency risk19545COSO – ComplianceLocal Govt & others (new risk)559225COSO Operationsoutsource vendors (greater/new risk)55/99225/405COSO operationsUnion issues (potentially remain)55/99225/405COSO Operations Transportation costs999729Sales & Collections (loss of reputation) Technology applied incorrectly (potential loss in quality of end product)559225b. Techniques for mitigating risk•Control: Design activities to prevent or reduce negative aspects and emphasize positive aspects of transferring production.-Phase-in the transfer of production and monitor/report costs/comparisons•Diversify: Spread the risk by assigning different stages in the manufacturing process to different suppliers.•Diversify: Spread the risk by storing portions of current production in different locations.•Control: Design all outsourced activities so that they can be carried out at the most advantageous cost possible.•Control: Design and manage activities to transport goods between South America, suppliers, and customers at the lowest cost.-Connect with a local lawyer/consultant who knows best how to deal withlocal govt officials
c.Audit scope and objectivesi) To review the company’s risk management associated with the production of metal powderii) To evaluate the project of outsourcing the production to vendors in South Americaiii)To assess the extent to which management has appropriate systems and practices to address the risks associated with the production of metal powder,whether the production is in-house or outsourced4d. Criteria•Samson should have in place public relations policies to address environmental concerns.•The contracts with each of the vendors should include confidentiality clauses.•Samson should have a plan in order to meet customers’ requirements in case of strikes or other related problems with employees.•The company should evaluate the costs of outsourcing in comparison to in-house manufacturing.