Business risk analysis, Auditing

Business Risk Analysis

Business risk can be analyzed between external and internal risks:

External risks:

  • Changing legislation (e.g. minimum wage)
  • Changing interest rates (especially with highly geared companies)
  • Changing exchange rates
  • Public opinion, attitudes, fashions (e.g. environmental factors)
  • Price wars initiated by competitors (e.g. supermarkets)
  • Import competition (e.g. the textile trade)
  • Untried technologies and ideas (e.g. traders)
  • Natural hazards (e.g. fire or flood or effects of global warming)
  • Bad debts
  • Litigation
  • Environmental matters
  • Inflation
  • Political factors

Internal Risks:

Internal risks can also harm the company. These comprise:

  • Failure to modernize products, processes, labor relations, marketing resulting in loss of competitive edge.
  • Employees (e.g. ineffective recruitment or training policies)
  • Board members (e.g. ineffective corporate governance)
  • The process of dealing with suppliers or customers
  • Excessive reliance on a dominance chief executive (thereby weakening internal control)
  • Inadequate cash flow and the risk of corporate failure
  • Inappropriate gearing (resulting in a lack of financial efficiency)
  • Related parties resting in inappropriate terms of trading
  • Inappropriate acquisitions and poor future prospects
  • Overtrading resulting in cash shortages
  • Excessive reliance on one of a few products, customers, suppliers
  • Internal control weaknesses
  • Computer systems failure and loss of records
  • Fraud


Posted Date: 12/3/2012 6:01:25 AM | Location : United States

Related Discussions:- Business risk analysis, Assignment Help, Ask Question on Business risk analysis, Get Answer, Expert's Help, Business risk analysis Discussions

Write discussion on Business risk analysis
Your posts are moderated
Related Questions
Verification Work - Audit Process At the same time the audit process will need verification work as an example: examination of costing records, allocation and verification of

Question: Part A (i) Describe audit sampling. Why do auditors sample instead of examining every transaction? (ii) List the four factors that enter into the sample size

Comparison of the Negative and Positive Methods Negative Method According to this method of circularisation, the customer is asked to communicate only when he does not ag

Attempts to define True and Fair It must be concluded that there has been slight attempt precisely to define fair and true. The Companies Act needs an auditor to report in

Audit of Assets- Audit Process Non current assets have the fundamental characteristic which they are held for require in the business and not about resale. IAS 1 Presentation

Goodwill and Fair Value The main points the auditor needs to verify for any goodwill arising in the accounting period are as follows: (i) Examine the procedure used to find

Valuation - Detailed Audit of Stock IAS 2 prescribes such stock be priced at the lower of price and net realizable price, It is up to the auditor to ensure that net realizable

Reporting to the members Except the faults and irregularities outcome in the accounts not giving an accurate and fair view, or do not conform to statute, or appropriate books h

Plant and Machinery - Valuation and Authorization Valuation Valuation is at depreciated historic costs.  Auditor's duty is to make sure that the accounting policy for dep