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Pinnacle Case Study 2

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Submitted By aparna28
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Pinnacle Case Project: Part 2
1.
a. Likelihood of financial difficulties: The two articles mentioned bring up concerns over whether Pinnacle can rely on sales of solar powered engines. These articles imply that Pinnacle may not have the capabilities needed to perform well in that industry. Also, if EPA regulations are postponed, Pinnacle’s customers will not have as much reason to switch to solar powered engines.

b. Acceptable Audit Risk is low because acceptable audit risk stems throught the idea that financial statements may be misstated however considering going concern, if the company in fact entails no product using solar power then there might be reason to worry depending upon how much it has invested.

2.
a. Management integrity: By having products that do not look like the ones on Pinnacle’s website, they are falsely advertising their products. This shows low integrity in the company if they are not honestly describing their products online.
b. Acceptable Audit Risk is Low. The reason we assign low acceptable audit risk to this account is due to the risk that may or may not be contributed through the deception of the inventory. Due to risky internal controls suggested by the warehouse manager’s response, we have reasonable belief that the inventory account and the external users may be affected by this.

3. None, *contributes to 11.

4. None

5.
a. Likelihood of financial difficulties: As the missing accounts receivable is a large percentage of the total balance, this may present a problem for Pinnacle if they were to not receive that money. The customer has not made any payments for months, which shows that this is a significant problem that needs to be addressed.
b. Acceptable Audit risk is Low. The reason we assign a low acceptable audit risk is because the materiality of the accounts receivable being at 15%.

6. External Users,

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