Question

Read the information and explain the solution/s.

i) Dr. Jone is a qualified accountant and he is running a CPA farm. He wants to improve the financial performance of the firm through risk management within two years. He approached you as a risk consultant. Suggest her a risk framework that will help her to minimise risk and improve performance of the organisation. The framework must include continuous review as a part of risk strategy.

ii) Dr. Jone wants to establish financial recording systems to monitor and evaluate changes in market conditions and business needs using range of data sources. Advise him.

iii) In recent years big 4 companies found to compromise with conflict of interest issues and eventually they had to pad substantial amount of penalty. Please identify a risk management process for the CPA farm could develop that help them to comply with ethical, legislative and organisational requirements of ASIC when acting as an external auditor.

Answer 1

1.Risk taking is fundamental to economic reward .The challenge is to recognise which risks differently impact business out comes and transform how those risk are mamaged in order to protect the business,enhance performance and drive value creation.So to improve the financial performance through risk mamagement Dr.John has to find innovative and effective ways to 1.grow revenue.2.optimize perfromance 3.Protect their organisation.

Integrated risk and performance management create competitiveness.So firm should be able to take risk effectively.

2.To monitor and evaluate changes in market condition and business needs by using data sources following advise given to Do.John business data sources has two types external information sources and internal information sources.information can be used to evaluate market condition such as changing tastes and needs ,buyers need, political changes, monitor economic conditionetc.So financial recording system should be of sch type that it effectively monitor and evaluate business needs our data sources itself integrated in such way that financial system completed.

3.ASIC has responsibility for investigation and enforcement of financial reporting.The following risk mamagement process should be develop by CPA firm to complywith ethical ,legislative and organisational requirement.1.Ensure timely and accurate payment of interest..2.Debt amounts should be within the prescribed limit.so there will be no overburden of interest expenses.3.Ethical and legislative issuses regarding interest payment should comply properly.4.all document related to interest payment and debts procured effectively.