Asher Farms Essay

Political – In class the major political topic that we focused on was possible affects on the industry if immigration laws became stricter. This industry is highly dependent on cheap labor. If all of a sudden there were not enough workers in the industry there would not be enough chicken available to meet the demand. Economic – Evident from the case, the chicken market is heavily influenced by currency fluctuation. This is because 15% of the total poultry production is exported and therefore changes in the price of the dollar can make chicken much more expensive in other countries or it can have a reverse effect. Social – Over the past couple of decades there has clearly been a shift in the amount of different types of meat products that are consumed. Those who watch their what they eat are more likely to eat chicken for the high protein benefits and minimizing some of the harmful affects of red meat. Technological – There had been a strong push for more efficient technology to be produced in this industry. The technology developments range from the machinery that does some of the work to new genetic engineering of the food that the chickens eat. These advancements allowed for the growth of the chicken industry without and slowdowns. Legal – Animal rights advocates have had major impacts on the ways that chickens can be processed. The conditions that the chickens live in could cause some legal problems in the future in different animal rights groups wanted to make changes. Environmental – Spread of disease always seems to be a major concern in the food industry. Contamination is very possible and could potentially cause huge problems. The FDA would like to minimize the possible affects of any type disease from spreading such as salmonella or other bacteria’s that are harmful. I feel that all of the business risks identified in question 1, the PESTLE acronym, all have the same potential to impact the risk of material misstatements on the financial statements. These business risks would all put revenue, cost of goods sold, wage expenses, and certain discloses at risk for being misstated. This would require more substantive tests to provide more reliable evidence that the financial statements are correctly stated. Obtaining knowledge about the client’s industry helps to highlight practices unique to that industry that may have an effect on the client’s financial statements. The auditor should obtain knowledge relating to the client’s business before commencing the audit. Understanding the client’s business provides information regarding events and transactions that may affect the client’s financial statements. Just like an auditor is not responsible to provide absolute assurance that the financial statements are correct, an auditory does not have the responsibility to identify or assess all business risks because it would be not efficient, timely, or costly to do so. As discussed in question 1, some examples of business risks that should be considered include; immigration concerns, currency fluctuation, health changes, technological development, and the spread of disease. An example of a business risk that might not lead to a risk of material misstatement in the financial statements that we discussed in class was opening new locations and growing the business.