Question

3- Explain in detail the inherent risks factors are involved while assessing the risks for the intangible assets?

4- The testing of hierarchy is considered to be more effective and more efficient. Why?

5- Contrast reliance strategy VS substantive strategy?

Answer 1

3. Intangible assets are non-physical assets which adds to a value to the business. Example: patents, copyrights, goodwill.

Inherent risks factors involved while assessing the risks for intangible assets are:

• Most companies leaks the valuable and confidential information about the intangible assets through their customers,suppliers. This endangers the company's profit margin in the long run.
• The technological advancements affects the product under constant development.
• The majority of the companies are not able to prove that they own intangible assets.

5. Reliance strategy is the amalgamation of a group of business intermediaries, financial planners to help owners and buyers.

Substansive strategy means the auditor will conduct the auditing of financial statements directly and not relying on entity's controls.