Are there long term contracts with customers major

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Are there long term contracts with customers?Major suppliersAre they reputable? Supply quality goods on timely basis? Overseasor domestic?Does client pay supplier accounts on timely basis?32FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney
Gaining an Understanding of a ClientEntity level(continued)Employment contracts, relations with employeesNature and complexity of payment, unionizationHow happy are staff? Risk of disruption?Sources of financingReliability of funding, structure of debtAbility to meet interest and principal paymentsRestrictions in debt contractsOwnership structureRights of shareholders, dividend policy and payments33FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney
Gaining an Understanding of a ClientIndustry levelUnderstanding the client’s position in the industry, competitivepressures, government support, overall demand for productsWhat risks to client arise from nature of industry and client’sposition within it?Compare client to national and international competitorsAuditor may have special industry expertise and knowledge34FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney
Gaining an Understanding of a ClientIndustry level (continued)Competitive pressure on client’s profits, ability to withstandindustry downturnClient’s reputation relative to competitors, risk of losing businessand profitsLevel of government support for industry and impact ofgovernment regulationOverall level of demand for industry goods and servicesimpacton revenue, impact of technological changes35FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney
Gaining an Understanding of a ClientEconomy levelHow do overall economic conditions affect client?FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney
What are specific pressures on client to understate or overstateprofits in these conditions?36
Gaining an Understanding of a ClientRelated partiesIdentification and appropriate disclosure of a client’s relatedpartiesExamples of related parties include: parent companies, subsidiaries,joint ventures, associates, company management ,and close familymembers of key managementLack of independence may lead to transactions outside of thenormal course of businessThis increases the susceptibility of the financials statements tofraud and error37FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney
Gaining an Understanding of a ClientRelated parties(continued)Specific requirements for the auditor (Canadian AuditingStandard (550) include:A team discussion of susceptibility of the financial statementstofraud and errors as a result of these relationshipsAsk management to identify all related parties includingdetails of the nature, type and purpose of transactions38FAC823:Enterprise Risk Management& Internal Control…..2021/T Penney

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