Risks faced by CWTI Essay
Risks faced by CWTI
As requested, I have identified the following risks and methods required by the company to reduce or mitigate these risks to an acceptable level. Please review this so that we can discuss the issues prior to circulating to the audit committee.
a. Competition Risk:
The risk of losing customers to competitors. (This risk can be mitigated by improving our quality while driving our cost down; can be achieved by spending more money at the selection stage of logs) The risk of having to constantly increase price year over year which can lead to loss of sales. (This can be mitigated by implementing a lean system of managing resources.) The company may not know what effect the transporting of trees by trucks will have on the overall production versus transporting trees by river via pontoons. (This can be mitigated by research.)
2 Environmental Risk:
Business practices in forestry do not always coincide with what is acceptable; the company may suffer a loss of reputation if it is associated with activities that would not be permitted. (This risk can be reduced by research and declaration and enforcement of ethical standards.) Harvesting trees may involve the company in controversies such as those related to deforestation. (This risk can be reduced by involvement in organizations dedicated to reforestation, for example.) The company may be subject heavy fines by government for damaging the environment. (This risk can be mitigated by practicing environmental friendly forestry.)
3 Financial management and treasury:
The company could be exposed to high inflation rates and the potential devaluation of its investment and income. (Consideration can be given to finding methods of hedging this exposure.) The company will have to consider the risks involved in financing the fleet of logging trucks and plant equipment. Interest payments will be affected by the fluctuations of the US dollars vs. the CDN which may result in higher than normal interest expenses. (Consideration can be given to finding methods of hedging this exposure.) The company will be exposed to a longer inventory and receivables cycles in the US markets. This may create a need for more operating capital than previously considered. (The company should negotiate 30days credit term, same as CDN counterpart)
Sales to US are exposed to foreign currency risks. (Consideration can be given to finding methods of hedging this exposure.)
4 Equipment maintenance
The company will have the risk of high cost of maintenance. (This risk can mitigated by research on leasing equipment if found to be cost effective.)
Equipment will have to be replaced at end of their useful life. (This risk can mitigated by research on leasing equipment if found to be cost effective.)
5 Workforce safety
The risk of the company workforce being injured or die.
(This can be mitigated by proper training and education of the workforce on a regular basis.)
Question 3 Below
Look up Table:
DATE: October 7, 20X4
TO: John Deer, Director
FROM: Alex Jewanram, Assistant Director of Internal Audit
RE: Draft audit planning memo
Kindly see below my draft audit plan memo:
The first six steps of an audit plan are as follows:
1. Knowledge of the Food Services Unit.
Knowledge of the organization is a must in order to start any audit planning. This knowledge can be obtained by interviews of head of departments, managers and key personnel. The audit of the Food services unit will entails interviews with managers at various levels to obtain specific knowledge of how things are structured, also visits to all locations to be audited.
2. Define the audit universe
After obtaining the knowledge of the Food Services Unit, I will then define the audit universe by identifying all the auditable units within the Food Services Unit. I will then create a risk analysis plan and rank the importance of the auditable units.
3. The purpose and scope of the audit
1. The purpose is to evaluate controls over ordering, receiving, distributing and storing restaurants and cafeterias food and supplies
2. To evaluate the process for planning and managing inventory levels.
2. To evaluate the security of inventory.
The audit will be focus on internal controls, inventory , day-to-day operations and cash handling.
4. The fourth step is to decide whether it will be a long-term or short-term planning based on the purpose and scope established.
5. Once, the audit universe is defined, I will then develop a plan with a budget for working hours and staff assignments. This will have to review by my director before approval. I must consider the cost benefit analysis in this process.
6. Finally, I will prepare the audit programs.
This outlines the set policies and procedures to be followed during the course of the audit.