You Are Teaching a Class of New Hires at Your

question 43

Essay

You are teaching a class of new hires at your international accounting firm. Explain the audit risk model using a mathematical formula.

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Definitions:

Incentives

Have two pieces: a performance evaluation metric, like sales, profit, or investment return, and a reward scheme that rewards better performance, like a bonus, the promise of a promotion, or a commission. Performance evaluation metrics can be objective or subjective.

Supplier Power

The influence suppliers have over the market or customer base, often due to lack of competition, affecting prices, quality, and availability.

Sourcing Inputs

Involves the process of finding and obtaining the necessary resources, materials, or components required to manufacture a product or provide a service.

Value Capture

A process by which companies retain a portion of the value they create for customers, often through pricing strategies or intellectual property.