Risk Assessment Levels (Based on information from Understanding the Entity & Control Environment)

1 Financial Statement/Assertion Level Risk

Risk of material
Inherent risk assessment and classification Control risk classification misstatement
classification
No.
Risk Description H/M/L* Risk Description H/M/L* H/M/L*

1 Slow payment from customers Poor credit control &

management
H H H Trade receivables

2 Slow stock turnover Poor inventory controls and

H management H H Inventory

3 Default in repayment of borrowings Close monitoring of repayment

and on-going discussion with
H bankers on liquidity. Sufficient L M Borrowings AND GC
cash reserves

4 Adverse effect of business disruption Overide of controls over

resulting in drop in sales preferential transactions. No
H TOC on sales performed H H Sales

5 Director of the Company is also a major M Overide of controls over

shareholder of the Company preferential transactions M M
 CONCLUSION: Overall Financial Statement risk level is HIGH /MEDIUM / LOW **

2 Financial statements line items risk assessment - Balance Sheet

% of Change
Significant risks
Balance Sheet line items Inherent risk Control risk Audit Risk from prior
identified
year
No.

[from Pre-
H/M/L H/M/L H/M/L
AR]
1 Property, plant & equipment M L M -
2 Investment properties M L M -
3 Other investments L L M -
Slow moving stocks,
Inventories H H H Somedeficiencies in
stock controls
4
Slow paying customers,
Trade receivables H H H Poor credit control
5
-
Other receivables, deposits and
L L L
6 prepayments
Director of the
Company has 40%
Amount due from related parties H H H
equity interest in the
7 Company
Fixed deposits L L L -
8
L L -
9 Bank balances L

Trade payables M L M -
10
Other payables & accruals L L L -
11
 Provisions M M M Accounting estimate
12
Bank overdrfats L L L -
13
Possible delay or
default in repayment
Term loans H L M due to slower collection
from customers
14
Possible delay or
default in repayment
Finance lease H L M due to slower collection
from customers
15
Tax payable L L L -
16

Share capital L L L -
17
Retained earnings L L L -
18
Revaluation reserve L L L -
19

Possible delay or
default in repayment
Term loam H L M
due to slower collection
14 from customers
Possible delay or
default in repayment
Finance lease H L M due to slower collection
from customers
15
Deferred tax liability L L L -
20

NOTE: Detection risk is set as NEGLIGIBLE, as no information has come to our attention that would prohibit us from carrying out the necessary
audit procedures
3 Financial statements line items risk assessment - Income Statement

% of Change
Significant risks
Balance Sheet line items Inherent risk Control risk Audit Risk from prior
identified
year
No.
[from Pre-
H/M/L H/M/L H/M/L
AR]

1 Slow down in demand

for the Company's
Revenue H H H
products. NOTE:
Controls not tested
2 NOTE: Controls not
Cost of sales M H H
tested
3 Other income L L L -
Operating expenses L M M -
4
Administration expenses M M M -
5
Staff costs L M M -
6
Tax expense L L L -
7

NOTE: Detection risk is set as NEGLIGIBLE, as no information has come to our attention that would prohibit us from carrying out the necessary
audit procedures