EarthWear Clothiers: Audit Risks

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Table of Contents

Business risks
Management assertions
Audit risk
Internal controls
Effect of audit procedures
Materiality
Reference

Business risks

The core business risks to be expected in the target scenario include the threat of being outperformed by the competitors, as well as failing to develop a strong brand name and a clear competitive advantage that will make the company easily visible. Therefore, appropriate steps must be taken to ensure that the specified risks are avoided.

Management assertions

It is believed that the organization is managing its current set of processes sufficiently enough to become particularly visible in the target market in the nearest future. Specifically, the emphasis on cost-efficiency and the promotion of sustainability within the company’s setting as the main means of maintaining its competitive advantage should be listed among the key management accomplishments.

Audit risk

Among the main types of audit risks that EarthWear Clothiers has been expecting, detection risks require particularly close attention. The specified type of risks encompass the extent of threats associated with the failure to notice an emergent threat and introducing an immediate action to counteract it (Saliha & Flayyihb, 2020). Due to the comparatively low experience in the global market, EarthWear Clothiers is likely to encounter the specified risk in the nearest future.

Internal controls

The key internal controls that the company currently has included the threat of an error or an instance of fraud in the corporate context. Indeed, since the company has not yet developed sufficient loyalty in its staff members, the probability of corporate fraud or an error is presently quite high (Saliha & Flayyihb, 2020). Thus, the specified risk needs to be taken into account when designing the corporate risk management strategy.

Effect of audit procedures

Finally, the effect of audit procedures needs to be described in order to examine the company’s full potential. Currently, EarthWear Clothiers is experiencing difficulties in advancing in the target market. It is believed that the introduction of the audit will help the organization evaluate the extent of probability of its success in the target economy. Furthermore, an appropriate business strategy can be designed in order to avoid core risks and become a recognizable brand.

Materiality

Finally, the materiality of the identified risks is quite high given the current level of competition in the global market. Indeed, major clothing brands have already established profound presence in the global market, thus, removing any chance for minor organizations to climb to the top. For this reason, the materiality of being ousted form the specified economic setting by a larger brand is exceptionally high.

Reference

Saliha, J. I., & Flayyihb, H. H. (2020). Impact of audit quality in reducing external audit profession risks. International Journal of Innovation, Creativity and Change, 13(7), 176-197. Web.

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