Assessing Risks of Material Misstatement (2)

Question 1

What is complexity (R)

Answer 1

Regulatory - lots of complex regulation

Question 2

What is complexity (B)

Answer 2

Business model - complex alliances and joint ventures

Question 3

What is complexity (F)

Answer 3

Financial reporting framework - complex accounting measurements

Question 4

What is complexity (T)

Answer 4

Transactions - complex arrangements (off-balance sheet finance)

Question 5

What is subjectivity (A)

Answer 5

Wide range of possible accounting estimates (e.g. depreciation)

Question 6

What is subjectivity (M)

Answer 6

Management choice of valuation technique

Question 7

What is uncertainty (F)

Answer 7

Financial reporting - estimation uncertainty

Question 8

What is uncertainty (P)

Answer 8

Pending litigation and contigent liabilities