Name: Josue Tumialan Student ID: 213-851-407 Section: B

Individual Assignment

Beaumont Limited

A. Provide 2 causes of information risk relating to the financial statements of BL and explain how the conduct of an audit reduces each
Information risk is the likelihood of improperly record information which end up being provided to decision makers. In this case I was able to identify two possible causes of information risk at Beaumont Limited: i. Not adopting proper internal control and formal accounting policies to prepare financial statements. An audit will reduce this risk by evaluating the management assessment of internal controls, make sure they are presented in accordance with applicable accounting standards and whether the error is material or not

ii. Lack of task diversification, Kevin Bastian (BL’s shareholder) was in charge of 3 complex aspects of the business which are accounting, finance and administration which usually involve large amounts of data. An audit will detect any material error that might have occurred for handling too much information by one person

B. Describe a management responsibility relating to the financial statements of BL that has not been properly completed. Explain why management responsibility is important
Pierre Timmons, the new Chief Financial Officer, found out that appropriate internal control was not in place. In addition to this he found that BL have not adopted proper accounting policies in preparing their financial statements. Management is responsible for the proper preparation of financial statements using a proper reporting framework (GAAP) and corresponding accounting policies. Management is also responsible of maintaining adequate internal control. Good internal controls are essential for making financial statements fairly representative which represent the economic reality of a