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Cole Foods Audit Summary

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Since the client has never done audit adjustments in the prior audits, Simon concludes that the inherent risk of Cole Foods must be zero for the coming engagement. This conclusion is incorrect. Inherent risk is the susceptibility of an assertion to material misstatement, assuming no related internal controls. Although the company has not done any audit adjustments and the changes in the surrounding business environment will cause some inherent risks to the company, the inherent risks are inevitable. some of inherent risks may arise due to changes in the operating environment, corporate restructuring and new business models, products, or activities.
Therefore, auditors must have a clearly understand of Cole Foods Limited’s business environment

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