4.

(i) Self interest- due to business relationship- remove the individual from the audit team
-independent review
(ii) Self review- taxation services- Advice to be obtained from external tax professional
-work should be reviewed by senior expert person having no
Involvement
(iii) Intimidation- threatening the auditor with removal- take legal actions
-must decline or resign from engagement
(iv) Familiarity- Long association of audit team- rotate personnel
-independent partner control reviews.

5.

Area of minimum concern Area of most concern

5 Foreign exchange risk 1 Technological change
8 Inventory misappropriation 3 Environmental regulation

Area of least concern Area of moderate concern

7 Human error 2 Poor customer service
4 Loss of key employee
6 Financial risk
1. Technological change: Invest in R&D projects to keep updated on the radical changes in
technology, know the market situation of the industry
2. Poor customer service: employee training, ensuring customer feedback, providing incentives
to employees for best services to customer
3. Environmental regulation: forming regulation committee, ensuring compliance with
international regulation standards
4. Loss of key employees: monetary incentives, insurance policy, job security, individual skill
development policy
5. Foreign Exchange risk: keeping foreign currency deposits, can be mitigated with currency
forward or future contracts
6. Financial risk: keep less leverage in the capital ratio, portfolio investment, keeping enough
insurance, proper cash flow management
7. Human error: install automation system, train individual, following a double check
procedure
8. Inventory misappropriation: install automation system, train individual, following a double
check procedure, review inventory on a regular basis, simplify the process for easy
understanding, improving receiving and stocking process.