Pinnacle Manufacturing―Part Ii
a. Identif specific considerations from part I and II of the cas that affect your assessments of engagement risk and acceptable audit risk. use each of the three factors in the text to categorize your conclusions:
External users' reliance on financial statements
likelihood of financial difficulties
Management integrity
Acceptable Audit Risk and Engagement Risk Issues:
External users’ reliance on financial statements:
1. The company is privately held, but there is a large amount of debt, therefore the financial statements will be used fairly extensively. Also, management is considering selling the Machine-Tech division, which has the potential to result in extensive use of the statements by the buyers.
2. Item 4 in the planning phase indicates plans for additional debt financing.
Likelihood of financial difficulties:
1. The solar power engine business revolves around constantly changing technology, thus making it inherently more risky than other businesses, with a better......
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