BUSN7054 Auditing: Inherent and Control Risk at Harris Technology

This report identifies and analyzes six key factors that may impact the inherent and control risks of Harris Technology Group Limited. These factors include the suspension of the audit and risk management committee, the resignation of a key director, a high loan portfolio, reporting of losses and decli...Read More

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AUDITING & ASSURANCE SERVICES
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Factors That May Have an Impact on the Inherent Risk or Control Risk for Harris
Technology Group Limited
The management of inherent and control risks are key to any type of organization all over
the world. Harris Technology Group Limited is not an exception in this case. This is the reason
why most corporations today are increasingly considering setting up of an Audit and Risk
Management Committee whose function is to oversee this audit and risk management function of
the organization1. Looking at the business, the industry, and the annual report for the company,
we can identify a number of factors that possess risks to the company in one way or another.
These factors include.
 Suspension of the audit and risk management committee following changes made by the
company in the composition of the board2. Suspension of the audit and risk management
committee is an inherent risk as some of the oversight role played by the committee
would be unattended to.
 The resignation of the Mr Mark Goulopoulos as the Director for the company can have
detrimental effects to the functioning of the company as the new Director will take time
before adapting to the work environment of Harris Technology Group3.This is a control
risk.
 A very high loan portfolio amounting to $1,000,000 unsecured loan from overseas
lenders. A huge debt affects the liquidity position of the company as much of the funds
will be channelled towards repayment of debt. This is an inherent risk.
 Reporting of losses amounting to $2,846,881 from operating revenues of $51,068,575
shows that the company is investing much of the funds earned in the acquisition of
subsidiaries which have not been profitable before. This possesses a risk of further
pushing the company into a financial crisis. The company further registered a drop in the
revenues by 5.52% in 2017 from $54.05m in 2016 to $51.07m in 2017. This shows that
the company is not doing well business-wise4. This is an inherent risk.
1 (Wallace and Kreutzfeldt 1995, pp.459-481.)
2 ("Harris Technology Group Ltd (ASX:HT8) – Annual Reports" 2018, pp. 23)
3 ("Harris Technology Group Ltd (ASX:HT8) – Annual Reports" 2018, pp. 22)
4 ("Harris Technology Group Ltd (ASX:HT8) – Annual Reports" 2018, pp.35)

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 Ecommerce Risks. Since most of the transactions for Harris Technology Group are being
done electronically, there are inherent risks for the company including security breaches
for debt cards. These risks exposes customers to fraud, disputes and chargebacks5.
 Acquisition of many entities at the same time possesses a great risk to the company. This
is because, if the acquired entities do not perform better, the group is likely to go into
bankruptcy6. This is an inherent risk.
 Investment in overseas markets through joint ventures can be risky as the company may
not have adequate control for the joint ventures located in faraway countries.7
Bibliography
"Harris Technology Group Ltd (ASX:HT8) – Annual Reports". 2018. Ht8.Com.Au.
http://ht8.com.au/investor-relations/annual-reports.
Wallace, Wanda A., and Richard W. Kreutzfeldt. 1995. "The Relation Of Inherent And Control
Risks To Audit Adjustments". Journal Of Accounting, Auditing & Finance 10 (3): 459-
481. doi:10.1177/0148558x9501000303.
5 (Harris Technology Group Ltd (ASX:HT8) – Annual Reports" 2018, pp.21)
6 ("Harris Technology Group Ltd (ASX:HT8) – Annual Reports" 2018, pp.4)
7 (Harris Technology Group Ltd (ASX:HT8) – Annual Reports" 2018, pp.22-23)