* PLEASE DO NOT PROVIDE THE SOLUTIONMANUAL.
Williams Pharmaceutical Company produces a number of drugs thatare regulated by various agencies, including, in the United States,the federal Food and Drug Administration (FDA). These agenciesissue licenses that approve drugs for sale and establish specificregulations regarding production quality and inventory security,violations of which can result in fines or the suspension ofproduct licenses. All the drugs are protected under patents filedin various jurisdictions, and Williams markets the drugs in theUnited States as well as in a number of other countries. Thecompany faces significant competition from other pharmaceuticalcompanies globally.
a. Identify three business risks that are faced by Williams withrespect to production processes and inventories.
b. For each of the risks identified in part (a), state whetherthe business risk results in a current-period inherent risk ofmaterial misstatement of the financial statements (financialreporting risk). If the business risk results in a financialreporting risk, describe that risk in terms of the type offinancial statement misstatement that could occur.
c. Provide examples of how Williamsâs management might mitigatethe risks (e.g., specific controls) identified in part (b) asfinancial reporting risks.
d. For each risk identified in part (b) as a financial reportingrisk, describe substantive auditing procedures that might be usedby the auditors if management did not have controls to mitigate therisk.
* PLEASE DO NOT PROVIDE THE SOLUTIONMANUAL.
Williams Pharmaceutical Company produces a number of drugs thatare regulated by various agencies, including, in the United States,the federal Food and Drug Administration (FDA). These agenciesissue licenses that approve drugs for sale and establish specificregulations regarding production quality and inventory security,violations of which can result in fines or the suspension ofproduct licenses. All the drugs are protected under patents filedin various jurisdictions, and Williams markets the drugs in theUnited States as well as in a number of other countries. Thecompany faces significant competition from other pharmaceuticalcompanies globally.
a. Identify three business risks that are faced by Williams withrespect to production processes and inventories.
b. For each of the risks identified in part (a), state whetherthe business risk results in a current-period inherent risk ofmaterial misstatement of the financial statements (financialreporting risk). If the business risk results in a financialreporting risk, describe that risk in terms of the type offinancial statement misstatement that could occur.
c. Provide examples of how Williamsâs management might mitigatethe risks (e.g., specific controls) identified in part (b) asfinancial reporting risks.
d. For each risk identified in part (b) as a financial reportingrisk, describe substantive auditing procedures that might be usedby the auditors if management did not have controls to mitigate therisk.
