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How to Assess Inventory Management Control Risk
When you assess a client’s inventory management control risk during your audit, remember that the business’s internal controls directly affect that risk. The inventory management process has control risk [more…]
How to Examine Risks Related to Liquid Assets
At every step of an audit, you have to consider risks and their associated controls. It’s important to consider risks and controls to make sure your audit effectively and efficiently guides you toward [more…]
Monitoring the Frequency of Deposits and Account Balances
While you’re interviewing the audit client, find out about its sources of cash and how often it makes bank deposits. If an audit client — especially a retail client or one receiving a preponderance of [more…]
Examining Inherent Risks of Fixed Assets
At every step of an audit, you have to consider risks of misstatement and their associated controls. When you are auditing assets, be sure to focus is on identifying risks in the fixed-asset management [more…]
Assessing Fixed-Asset Control Risk
When auditing a company’s assets, don’t forget to take a look at asset control risk features the company has in place. During your audit you can perform tests of internal controls to limit the number of [more…]
Thinking about Risk with Capital Investments
Risk is an issue even with simple investments like bank CDs. But with capital investments, no government agency is looking out for your interest and picking up the pieces if things do a Humpty Dumpty and [more…]
Interest Rate Risk and Inflation Risk in Corporate Finance
The vast majority of products available for investment that yield interest offer fixed rate returns. A fixed rate returnmeans that if you purchase an investment that offers a 1 percent annual interest [more…]
Minimize Your Company's Market Risk
Your company is careful. It chooses only the best customers, only the best investments, uses derivatives only to mitigate potential losses, diversifies clients and investments, and does everything right [more…]
Evaluate the Risk of Extending Credit
Credit is a form of loan. Corporations frequently provide their goods or services to customers on credit, which means that they expect to get paid at some later date. Extending credit is common for furniture [more…]
Identify Operating Risk Associated with Your Business
Operating risk, or operational risk, is the risk of losses or costs associated with business operations. According to the Basel Accords on banking supervision, this category includes just about every possible [more…]
Take a Look at Your Company's Liquidity Risk
If your company is owed money but doesn't have enough to pay the bills in the meantime, you’re a victim of liquidity risk! The most extreme form of liquidity risk, called [more…]
Portfolio Management Strategies for Your Corporation
The buying, selling, and trading of investments within a portfolio — optimizing the returns of the portfolio by managing which investments the portfolio holds — is considered [more…]
The Trade-Off between Risk and Return for Your Portfolio
According to modern portfolio theory, there’s a trade-off between risk and return. All other factors being equal, if a particular investment incurs a higher risk of financial loss for prospective investors [more…]
Diversify Your Portfolio to Maximize Returns and Minimize Risk
Because the risk of a single investment can’t be totally eliminated, corporations attempt to reduce the risk of a portfolio by picking investments that are likely to change in value in different ways or [more…]
How to Measure Your Portfolio's Risk
Exactly how risk is measured is a complicated issue. Before you can begin managing a portfolio you have to look at individual investments. Originally, this task was done using a calculation called the [more…]
Risk Aversion in Corporate Finance
There are certain risks that no amount of diversification can eliminate. Specific risk is any risk associated with an individual investment and holds the possibility of being eliminated or greatly minimized [more…]
How to Optimize Portfolio Risk
Collections of individual assets interact together to influence the overall portfolio. So when several investments are lumped together in a portfolio, every single investment has an influence on the portfolio [more…]
How to Enforce Strong Internal Accounting Controls
Any accounting system worth its salt should establish and vigorously enforce effective internal controls— basically, additional forms and procedures over and above what’s needed strictly to move operations [more…]
Internal Controls against Mistakes and Theft
Internal controls are designed to minimize errors in bookkeeping that processes a great deal of detailed information and data. Equally important, controls are necessary to deter employee fraud, embezzlement [more…]
How to Juggle the Books to Conceal Embezzlement and Fraud
Fraud, embezzlement, and illegal practices occur in large corporations and in one-owner/ manager-controlled small businesses — and in every size business in between. The purchasing managers in any size [more…]
How Auditors Discover Fraud, or Not
Auditors have trouble discovering fraud for several reasons. The most important reason is that those managers who are willing to commit fraud understand that they must do a good job of concealing it. [more…]
