Audit Risk Assessment For Partners REIT

Running head: Audit Risk Assessment for Partners REIT 1

Audit Risk Assessment for Partners REIT

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Audit Risk Assessment for Partners REIT 2

Partners REIT have adopted a strategy of using Assets A in market B, and using assets B

in market A. The strategy is particularly new and the company is trying to implement the

strategy for the first time so as to expand their profits. The move is likely to increase risk. The

company has a proper management which constitutes a board of directors to monitor the

company’s transaction. The board of directors oversees that annual and quarterly financial

statements are prepared to ensure that the transactions within the company are transparent and in

line with legal requirements which reduces inherent risk in auditing. On the other hand Partners

REIT is focusing on acquiring and managing a portfolio of both the mixed use community and

the retail community in a bid to increase their mid-market size from $10 million to $50 million

which will compromise a stable cash flow and values added property from both the primary and

secondary sector. The move is likely to increase the control risk within the company and a

possible overstatement and understatement in the financial statements is possible. The top

management ensures that the company is registered under the laws of investment in Ontario. The

company also ensures that it keeps a record of the tax information and breaks down tax in form

of per unit distribution an indication if increased risk to legal exposure. Investors at partners

REIT depend largely on the ability of the company to create a stable clientele base. The company

on the other hand depends on such investors so as to thrive financially which exposes it to the

risk of losing financial liability.

The business risks are likely to affect the company in future in various ways. The new

strategy adopted by the company is not familiar to the auditors and thus may be difficult to

predict its success rate. The strategy is likely to increase the assessment risk which may result in

unreliable information concerning the efficiency of the strategy. The fact that the company

prepares and keeps record of the financial systems will make it easy to carry on with the audit of

Audit Risk Assessment for Partners REIT 3

manual financial activities. The audit of their computerized systems will also be easier as

information is well put which reduces the inherent risk associated with auditing. This makes it

easy to give some recommendations for the improvement of the financial system in a bid to

improve the company’s financial position. The financial objective is very huge and it is possible

that the company has weak control over it which increases the risk that we are likely to face in

terms of assessing control levels. This kind of information is likely to be well recorded and

guarded possibly because the company is under legal scrutiny which increases risk of legal

exposure. The fact that the company is looking to expand further is a move that will expose it to

more scrutiny by authorities and thus tax authencity is necessary. On the other hand the company

depends on the investors financially while it seeks to ensure availability of a ready clientele base

means that if the company fails to provide a good clientele base then they risk losing financial

liability. Among the risks that the company faces, the risk of expansion is the highest risk that

the company has a heavy price to pay for. For example expanding the market from$10 million to

50$ million exposes the company to huge risks as they may either loose the deal or get the deal.

This means that the financial officers must be very careful with the finances if the deal is to go

through. The other huge risk the company faces is the loss of liability risk and thus has to ensure

that it continually provides a stable clientele base. Though the company faces a lot of risks it still

has the capacity to excel as so far it has been successful in most of its endeavors given it has a

strong management

Audit Risk Assessment for Partners REIT 4

References

http://www.partnersreit.com/index.html

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