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Flashcards in Planning and Risk Deck (20)
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1

Buisness risk

~ risk inherent to co in its operations
~ 3 categories: financial, operational and compliance risks
~ ISA 315

2

Financial risk

arising from financial activities or financial consequences of operation e.g. cash flow issues

3

Operational risks

arising from operation reasons e.g. major supplier lost

4

Compliance risk

arises from non-compliance with laws and regs surrounding biz

5

Audit risk

that auditor expresses inappropriate audit opinion when FS materially misstated
~ ISA 200

6

Inherent risk

susceptibility of an assertion to misstatement that could be material (assuming no IC)

7

Control risk

material misstatement could occur and will not be prevented, detected or corrected on a timely basis by IC

8

Detection risk

auditors procedures will not detect a material misstatement (individual or aggregated)

9

Materiality: High risk client

Revenue: 0.5%
Assets: 1%
PBT: 5%

10

Materiality: Low risk client

Revenue: 1%
Assets: 2%
PBT: 10%

11

Data analytics (totally BRAVE)

Totally - able to test 100%
B - Breakdown
R - Reperform
A - Aged analysis
V - Variance analysis
E - Exception report

12

Return on capital employed (ROCE)

~ profitability
Profit b4 interest and tax/(SC + reserves + NC liab)

13

Operating profit margin

~ profitability
PBIT / revenue

14

Asset turnover

~ profitability
revenue/(SC + reserves + NC Liab)

15

Gross margin

~ profitability
gross profit / revenue

16

Current ratio

~ liquidity
CA/CL

17

Quick ratio (acid test)

~ liquidity
(CA - inventories) /CL

18

Inventory holding period

~ liquidity
(Inventories / COS) x 365days

19

Receivables collection period

~ liquidity
(TR / credit sale) x 365days

20

Payables payment period

~ liquidity
(TP / credit purchases) x 365days