Pinnacle Manufacturing Essay

1. External users reliance on financial statementsExternal users swear heavily on the financial statement of height Manufacturing. Although, Pinnacle manufacturing is a privately held company it incurs a large amount of debt. As a result potential users rely heavily on financial statements.Pinnacle is selling the machine tech division to focus on locomotive manufacturing, the companys core ope dimensionns. This causes buyers to also rely heavily on financial statements.In No. 6 the board chooses to finance the facial expression project mentioned in No. 4 by raising to a greater extent debt. Again bringing focus to the Financial statements.Likelihood of financial difficultiesThe solar Power engine business is focused on habitual faulting of technology, which makes the business riskier than other business and brings about a greater peril of bankruptcy. In No. 1, concerns are expressed about Pinnacles Solar-Electro Division.No. 9 identifies restrictive covenants. The requirements are to keep the on-line(prenominal) ratio above 2.0 and the debt-to-equity be lower-ranking 1.0. In Part I, the calculation of the current ratio fell below the requirement and thus the need for the loan.Management uprightnessIn No. 8 there is a significant employee turnover amongst higher-level positions. This turnover is possibly intentional and thus a greater obtain for fraudulent activities.2. No.1 The acceptable audit risk is Medium. The auditor would have to upraise that the articles are material. No. 6 Pinnacle Manufacturing is a risky lymph node and the auditors should check and verify each account. The acceptable audit risk is assessed as low. No. 8 Management ischanging its internal audit team. invigorated 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 ratio and debt-to-equity ratio are below the requirements management will invariably check to either increase or decrease current assets to converge criteria. Thus the audit risk is low.