Flowserve Inherent Risk Assessment Group Project

Do only part 1 and 2. Part I and II should be about one and a half pages long.

I. Audit Committee composition

A. Audit Committee members

1. Name

2. Independent of management?

3. Financial expert, and if so, qualifications?

4. Overall conclusion on the audit committee

II. Identification of significant business risks

A. Identify key industry risks per section 1A of the 10-K

B. For each industry risk identified, determine the potential risk of overstatement or understatement of the related balance sheet and/or income statement accounts

III. Preliminary Scoping Analysis

A. Scoping of and identification of significant balance sheet and income statement accounts using 5% of pre-tax income per the 10-K as the basis for preliminary materiality (unless dollar amount is appropriate for the client, i.e., 5% of revenues, total assets, etc.).

IV. Preliminary Trend Analytics

A. For each account balance identified in II.A. above, prepare a trend analysis by identifying both the dollar and percentage change between the current year balance and the prior year balance as identified on the 10K

B. Per your judgment, for all significant differences between 2015 and 2014 year end balances, identify the risk of overstatement or understatement of the specific balance

C. Example:

Acct   20152014  $ change % change          Risk

A/R   $5000  $4000            +1000        +25% O/S of A/R and Revenue

V. Cross-sectional analysis comparison

A. Prepare a comparative analysis of Flowserve's financial highlights key statistics to the financial highlights key statistics of the industry and identify the potential risks of overstatement or understatement of the specific related account balances

B. Example:

                             Client    Industry               Analysis                Risk

Current                .76          .86                         Possible               Understatement

                                                                       slow debt            of short-term debt

                                                                       payments           

VI. Overall conclusion as to your preliminary inherent risk assessment (high, medium or low) and reasons for your conclusion

Note that all sources of information must be referenced in order to comply with PCAOB documentation requirements.  You may use footnotes in your deliverable.

Attachment:- Assignment.rar