Balance Sheet and Potential Related Business Essay

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5-30 (Assertions)
1. The allowance for doubtful accounts is fairly presented in amount- Valuation and Allocation Assertion (Compare accounts receivable according to GAAP matching principle)
2. All accounts payable owed as of the balance sheet date are included in the financial statements- Completeness(Do the balances contain all transactions for the period)
3. All purchase returns recorded in the general ledger are valid- Existence/Occurrence(Do the recorded accounts represent valid liabilities at the balance sheet date)
4. There is a risk that purchases made in the last week of the month might be recorded in the following period- Completeness(Do the balances contain all transactions for the period)
5. The client may have …show more content…
Potential related business risks like if the entity has the personnel or expertise to deal with the technological changes in the industry.
Regulatory Environment Accounting principles and industry specific practices
Regulatory framework, for a regulated industry. Legislation and regulation that significantly affect the entity’s operations like piracy laws. Potential related business risk could be that there is increased legal exposure.
Other external factors affecting the business General level of economic activity (for example, recession, growth) Interest rates and availability of financing. Inflation currency revaluation. Potential related business risk might be that the demand has not been accurately estimated.
The clients business operations Major customers and contracts, terms of payment, profit margins, market share, competitors. The level of services liability, how this liability affects contracts and profits. Going concern and liquidity issues including loss of significant customers.
The clients investing activities and financing activities Acquisitions, mergers or disposals of business activities (planned or recently executed). Investments and dispositions of securities and loans. Leasing of
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