Page 109 - Auditing Standards

As of December 15, 2017

The methods the company uses to account for significant transactions that are outside the normal
course of business for the company or that otherwise appear to be unusual due to their timing, size,
or nature ("significant unusual transactions"); 7A and

Financial reporting standards and laws and regulations that are new to the company, including when
and how the company will adopt such requirements.

Company Objectives, Strategies, and Related Business Risks

.14 The purpose of obtaining an understanding of the company's objectives, strategies, and related
business risks is to identify business risks that could reasonably be expected to result in material

misstatement of the financial statements.

Note: Some relevant business risks might be identified through other risk assessment procedures, such as
obtaining an understanding of the nature of the company and understanding industry, regulatory, and other
external factors.

.15 The following are examples of situations in which business risks might result in material misstatement
of the financial statements:

Industry developments (a potential related business risk might be, e.g., that the company does not

have the personnel or expertise to deal with the changes in the industry.)

New products and services (a potential related business risk might be, e.g., that the new product or
service will not be successful.)

Use of information technology ("IT") (a potential related business risk might be, e.g., that systems
and processes are incompatible.)

New accounting requirements (a potential related business risk might be, e.g., incomplete or
improper implementation of a new accounting requirement.)

Expansion of the business (a potential related business risk might be, e.g., that the demand for the

company's products or services has not been accurately estimated.)

The effects of implementing a strategy, particularly any effects that will lead to new accounting

requirements (a potential related business risk might be, e.g., incomplete or improper implementation
of the strategy.)

Current and prospective financing requirements (a potential related business risk might be, e.g., the

106