Page 175 - COSO Guidance

Exhibit 1-1: Factors to consider when obtaining an understanding of the entity
and its environment (continued)

 Government policies affecting the conduct of the entity’s business
– Monetary, including foreign exchange controls
– Fiscal
– Financial incentives
– Tariffs and trade restrictions
 Environmental requirements affecting the entity’s business
 Other external factors affecting the entity’s business
– General level of economic activity
– Interest rates and availability of financing
– Inflation and currency revaluation
Nature of the entity

 Business operations
– Nature of revenue sources
– Products or services and markets
– Conduct of operations
– Alliances, joint ventures, and outsourcing activities
– Involvement in e-commerce, including internet sales and marketing activities
– Geographic dispersion and industry segmentation
– Location of production facilities, warehouses, and offices
– Key customers
– Important suppliers of goods and services
– Employment (by location, supply, wage levels, union contracts, pension, and
postemployment benefits, stock options, and so on)
– Research and development activities and expenditures
– Transactions with related parties
 Investments
– Acquisitions, mergers, or disposal of business activities
– Investments and dispositions of securities and loans
– Investments in nonconsolidated entities, including partnerships, joint ventures, and
special-purpose entities
– Capital investment activities, including investments in plant and equipment and
technology, and any recent or planned changes
– Life-cycle stage of enterprise (start-up, growing, maturing, declining)
 Financing
– Group structure of major subsidiaries and associated entities, including consolidated
and nonconsolidated structures
– Debt structure, including covenants, restrictions, guarantees, and off-balance-sheet
financing arrangements
– Related parties
– Use of derivative financial instruments
– Leasing of property, plant, and equipment
– Beneficial owners (local and foreign business reputation and experience)

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