(i) Business risks

Up to 2 marks for each business risk evaluated (up to a maximum of 3 marks in total if risks identified but not evaluated):

– Exchange rate risk
– Imports – transportation costs and potential for disrupted supply
– Reliance on one supplier
– Quality control issues
– High-tech/competitive industry
– Reliance on key customer contracts
– Regulatory issues
– Liquidity/solvency issues
– Poor profitability
– Change in key management

Maximum marks 12

(ii) Risk of material misstatement

Up to 2 marks for each risk of material misstatement identified and explained to a maximum of four
risks (up to a maximum of 2 marks in total for identification only):

– Initial translation of foreign exchange transactions
– Retranslation and exchange gains and losses
– Obsolete inventory
– Refunds to customers
– Capitalisation of borrowing costs to new production line
– Impairment of old production line
– Loan classification, measurement and disclosure

Maximum marks 8