Identify Whether the Following High Risk Conditions Are an Example

question 49

Essay

Identify whether the following high risk conditions are an example of incentives/pressures, opportunities or attitudes/rationalisation risk factors:
1.The company is very vulnerable to interest rate fluctuations
2.Management has significant financial interests in the entity
3.Many asset values are based on significant estimates that involve subjective judgements
4.Management does not place a high priority on ethical standards
5.Management shows an excessive interest in increasing the entity's share price
6.The organisational structure is overly complex
7.There is a high turnover of internal audit and information technology staff
8.The entity's industry is highly competitive
9.Internal controls are not effectively monitored
10. Management attempts to justify marginal or inappropriate accounting on the basis of materiality on a recurring basis.

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Definitions:

Compensatory Approach

A strategy or method used to make up for deficiencies or to provide compensation, often seen in contexts such as employee benefits, environmental mitigation, or in resolving disputes.

Validity Generalization

A concept in psychometrics indicating that the validity of a test is consistent across different situations or groups.

Structured Interview

An interviewing method where all candidates are asked the same predetermined set of questions to ensure consistency and fairness in the hiring process.

Personal Financial Credit

Access to borrowed funds provided to individuals by financial institutions under agreed terms for personal use, such as loans or credit cards.