RISK BASED AUDIT PLAN SOLUTION Following is an outline of the issues that could

Risk based audit plan solution following is an

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RISK BASED AUDIT PLAN SOLUTIONFollowing is an outline of the issues that could be included in the report. A sample report is provided in good form after the outline.3a.RisksRisk that the transfer of production to South America may cause problems with the local governments and ecological groupsRisk that outsource vendors may use Samson’s technology for their own productionRisk related to labour relations due to the shutdown in CanadaRisk that manufacturing costs will increaseRisk related to transportation activities-Currency riskCategory/issuescontrollabilityRisk wkness will occurImpact of weaknessTotalCurrency risk19545Local Govt & others (new risk)559225outsource vendors (greater/new risk)599405Union issues (potentially remain)599405Transportation costs999729Technology applied incorrectly (potential loss in quality of end product)5592251.4b. The four strategies an organization can take to respond to risk are: 6
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a.Controlling the risk (mitigating the risk) by reducing the likelihood of the event taking place, by reducing its impact, or both. For example, the airbags in a car reduce the impact of a collision in terms of the risk that a passenger in the car would be injured. b.Transferring (sharing) the risk to (with) other organizations. For example, a farmer transferring some of the risk ofbad weather causing a low crop yield to an insurance company by buying crop insurance. c.Accepting the risk. In this case, the organization takes its chances that risk events will be tolerable. d.Avoiding the risk by not engaging in the activity. Techniques for mitigating riskControl: 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/comparisonsDiversify: 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 with local govt officials3c.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 outsourced3d. CriteriaSamson 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.The company should examine the implications of outsourcing on all logistics of the processes.7
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