Question

For the restaurant industry

Analyze the risk factors and select the top three you feel pose the greatest risk of a possible material misstatement,

Select the one you feel poses the least risk for a material misstatement and

Explain the reasons.

Answer 1

If we talk about restaurant industry, there are different types of risks and challenges here like-

• Shifting of customer due to price policy
• Compromise with quality in case of excess workload because of more human work than any other organisation
• Maintainting integrity and reputation
• Maintaining the hygenic condition for employees and customers as a whole
• Getting and retaining qualified and expert staff is a challenging and important task here
• Keeping confidentiality

There are challenges and risks in this business as discussed above, the most important risk here can be-

• Daily reciepts, discounts and special offers can be a area of material misstatement
• Maintenance expenses is also a area of material misatement in the restaurant industry
• Stock variation and pilferage is also a area of material misstatement here

Although there are very challenging risks as well there are some things which are under control of the organisation also, can said to be less challenging-

• Rental expenses and other fixed costs