Accounting ...Auditing assignment Example | Topics and Well Written Essays - 1000 words

Accounting ...Auditing - Assignment ExampleFor A & E cycle, in that location could be complex transactions expenses that cannot be classified with precision. Similarly, product cycle is faced by the complexities in method to use in valuing stock and goods produced.Secondly, the inherent risks in all the three cycles would impress both the brace sheet and income statement of the business. R & C cycle may either increase or reduce the receivables and cash and this would at the same time affect the income reported by the business. Inherent risks in A & E cycles affects the expenses reported thus affecting income statement. Likewise, wrong valuing of stock affects the inventory value in the residue sheet and also closing stock which alters the income reported.In all the three cycles, the inherent risk is increases by the fact that there are external parties dealings. These parties accommodate the suppliers, debtors, and creditors. Fraudulent actions of these parties increase the in herent risks.In as much as there are similarities in the inherent risk in the three cycles, there are also some differences. Inherent risks in these cycles differ because of the differences in the nature of transactions involved. In R &C cycle, the asset involved is cash, A &E also involves majorly cash asset while and production cycle inventory is at risk. The three cycles are also characterized by different story standard requirements (Louwers 53). The manner of recognizing receivables is different from that of valuing stock or purchasing materials in the production cycle hence making their inherent risk different.R $ C cycle is entails the determination of the business debtors and the amount they owe to the business. The relevant department has to identify all the debtors and examine the credit period agreement. They then make the claims for the gold and adjust their debtors balances. Source documents include sales order, credit