'Pinnacle Manufacturing Essay\r'

'1. External users’ reliance on pecuniary statements\r\nExternal users rely severely on the financial statement of peak Manufacturing. Although, Pinnacle manufacturing is a privately held caller-out it incurs a large amount of debt. As a result potential users rely hard on financial statements.\r\nPinnacle is marketing the machine tech division to focus on engine manufacturing, the company’s core operations. This causes buyers to also rely heavily on financial statements.\r\nIn no. 6 the board chooses to finance the bodily structure project mentioned in none 4 by raising more debt. once more bringing focus to the Financial statements.\r\n likeliness of financial difficulties\r\nThe Solar Power engine air is focused on common transformation of technology, which makes the business take a chanceier than other business and brings about a greater misadventure of bankruptcy. In zero(prenominal) 1, concerns are explicit about Pinnacle’s Solar-Electro Di vision.\r\nNo. 9 identifies restrictive covenants. The extremitys are to live with the authorized ratio above 2.0 and the debt-to-equity on a lower floor 1.0. In Part I, the calculation of the trustworthy ratio fell downstairs the requirement and thus the need for the loan.\r\nManagement justness\r\nIn No. 8 thither is a significant swage amongst higher-level positions. This turnover is possibly intentional and thus a greater chance for fraudulent activities.\r\n2. No.1 †The agreeable audit risk is Medium. The auditor would have to prove that the articles are material. No. 6 †Pinnacle Manufacturing is a risky lymph node and the auditors should cop and verify each account. The satisfying audit risk is assessed as low. No. 8 †Management is changing its inherent audit team. New members would learn the company and the way the audits are done. The audit risk is low because auditors would not rely on management representation. No. 9 †Because the current r atio and debt-to-equity ratio are below the requirements management will constantly check to either increase or decrease current assets to meet criteria. Thus the audit risk is low.\r\n'