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
