Reference no: EM131234178
Flowserve Inherent Risk Assessment Group Project
Do only part 1 and 2. Part I and II should be about one and a half pages long.
I. Audit Committee composition
A. Audit Committee members
1. Name
2. Independent of management?
3. Financial expert, and if so, qualifications?
4. Overall conclusion on the audit committee
II. Identification of significant business risks
A. Identify key industry risks per section 1A of the 10-K
B. For each industry risk identified, determine the potential risk of overstatement or understatement of the related balance sheet and/or income statement accounts
III. Preliminary Scoping Analysis
A. Scoping of and identification of significant balance sheet and income statement accounts using 5% of pre-tax income per the 10-K as the basis for preliminary materiality (unless dollar amount is appropriate for the client, i.e., 5% of revenues, total assets, etc.).
IV. Preliminary Trend Analytics
A. For each account balance identified in II.A. above, prepare a trend analysis by identifying both the dollar and percentage change between the current year balance and the prior year balance as identified on the 10K
B. Per your judgment, for all significant differences between 2015 and 2014 year end balances, identify the risk of overstatement or understatement of the specific balance
C. Example:
Acct 20152014 $ change % change Risk
A/R $5000 $4000 +1000 +25% O/S of A/R and Revenue
V. Cross-sectional analysis comparison
A. Prepare a comparative analysis of Flowserve's financial highlights key statistics to the financial highlights key statistics of the industry and identify the potential risks of overstatement or understatement of the specific related account balances
B. Example:
Client Industry Analysis Risk
Current .76 .86 Possible Understatement
slow debt of short-term debt
payments
VI. Overall conclusion as to your preliminary inherent risk assessment (high, medium or low) and reasons for your conclusion
Note that all sources of information must be referenced in order to comply with PCAOB documentation requirements. You may use footnotes in your deliverable.
Attachment:- Assignment.rar
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