Additionally, NEC may face going concern and insolvency problem in next few years. If NEC does not have enough money to repay bank loan, there will be a solvency problem incurred. NEC repaid its debt in 2012 so NEC may not have much cash in 2013. From NEC’s 2013 Balance Sheet, there was large amount of current liabilities in 2012 may because some non- current liabilities from previous years fell due in 2012. NEC had to repay debt owing to creditors. However, NEC did not have drastic change in cash account in balance sheet 2013 and revenue in income statement 2013. In Cash Flow Statement, it showed that NEC sold its subsidiaries to outsiders to improve its solvency as proceeds on disposals of subsidiary increased significantly in cash flows from investing activities under Cash Flow Statement. 8

That means NEC had to keep the company solvent by selling subsidiaries. It is a concern of NEC since all subsidiaries have been sold; NEC will not have any method to get cash to operate and cover debts. These reasons link to the problem of going concern and insolvency. Figure 4: Comparing the current liabilities and non-current liabilities between 2010 and 2013 3.4 Expenses – completeness Business risk: Technological change As technologies keep developing as stated in technological factor in PEST analysis above (page5), NEC should catch up and adopt these developments in order to be not turned over within competitors and secure customer satisfaction. Recently, NEC is intended to provide new standard-definition (SD) and HD channels for niche audiences and special interest broadcasts. (IBIS World) Also following the trend of increase in using online, NEC interacts with online services such as acquiring 50% shares of Mi9.(Media release NEC, Oct.2013) Figure 5 below states that there is a greatest portion of demand for multi-platform content delivery in broadcast industry. For those reasons, NEC needs constant expenses including wages for technology experts to provide assistance. There will be risks of completeness of these expenses in order to make profit look good. Auditors will need to check and test the controls whether NEC is completing every expenses occurred. Substantive testing will also be required. 9

Figure 5: The 2013 BBS Broadcast Industry Global Trend Index 3.5 Revenue- occurrence Business risk: economy downturn and competition from other broadcasters Based on the prospectus provided by the Nine Entertainment Co., NEC primarily generates its revenue from the sales of advertising time during the broadcast to its audience and online display and search advertising through Mi9. Given the importance of advertising to NEC’s revenue, any decline in advertising could result in a loss in NEC’s revenue. There are two possible reasons for the revenue decline of NEC: firstly, companies may cut down their advertising expenditure in order to minimise the cost in the economy recession; secondly, the media industry in Australia is highly competitive, with a number of operators competing for market shares and revenue, such as ABC, TEN, which are mentioned in the first part of the report. The increased competition may compete NEC’s profit away. Hence, there is potential