"lead to compliance issues with regulatory requirements such as OH&S, food safety,environmental etc. Any regulatory incongruence could materially impact operations,8 reputation or monetary results of Metcash .3. Loss of Key StaffIn spite of Metcash’s efforts to train, develop and retain employees, some people from the topmanagement have left the organization. With the changes in place for strategic goals of the company,changes to key personnel like the chairman, maybe a source of demotivation and/or alienation for old9 employees .4. Risk of Increased Interest Rates on LoansThe deflationary retail environment puts pressure on cost and on top of this, the acquision of HTH can lead to higher business risks than in turn may increase cost of borrowingfor Metcash. Getting funds and having sufficient liquidity is imperative to the nature ofthis business at this point where it is trying to grow rapidly.5. Physical DisastersThere are events beyond control such as accidents, natural disaster etc. that cansignificantly impact Metcash’s operations. Such circumstances are beyond the control ofthe organization, however, the risk maybe reduced by having insurance against suchcircumstances. Unfortunately, it is uncertain to the extent of which such insurance coverwould fully mitigate the risk or not. 8 Corporate Governance Statement, Metcash Limited, 20169 Metcash Limited, Annual Report 20159 | P A G E 3. Accounts Susceptible to MisappropriationMetcash isknown for maintaining clean and ethical standards while preparing theirfinancial statements. There has hardly been a case of material misstatements found bytheir auditors. However, auditors must pay special attention while conducting the audit because Metcashis after all a huge retail giant dealing with fast moving consumer products and hence,very susceptible to misappropriation or fraudulent financial reporting. Their entirebalance sheet is capable of having material misstatements, but the four key accounts thatmost likely are: 1. Inventory accountInventory account is the major asset in the balance sheet that can potentially bemanipulated. Many ways of manipulation include:- Valuing the inventory at a higher price than what should be.- Showing that items are held but actually not owned (inventories that are on10 consignment)Metcash, being a grocery retain chain; have inventory moving within the store on a dailybasis. One way to gain extra inventory is during stock takes by counting empty boxes thatare stacked high on shelves. They also need to keep a strong vigil on their inventory.Metcash has a policy of discarding their damaged merchandise. However, a dishonest 10 ASA 31510 | P A G E employee or manager has the potential to sell them at a discount at the store by means offalse advertising. Another way Metcash has a way to manipulate inventory account is by fraudulentinventory counts. Metcash receives large shipments of produce and merchandise everyday. This means that the stock take can happen in such a way that all receiving reportscan be manipulated before the actual physical inventory count. Giving the auditor a toughtask in determining whether the counts are real or fictitious.2. Revenue AccountA consideration of fraud in a financial statement of audit instructs the auditor to normallypresume that there can be a possibility of risk of material misstatement due to fraud11 relating to revenue recognition accounts.The general practice for supermarket chains is that they follow a policy where revenue(sales) should be recorded. However, auditors must be aware of various methods bywhich revenue can be falsely inflated. Metcash receives shipments of various ordersfrequently and thus, are very vulnerable to internal control failures that can lead tofraudulent activities (Low, 2015). Being a supermarket chain, Metcash has the potentialto the following frauds in relation to their revenue accounts:- Recognize revenue that never occurred. 11SAS 9911 | P A G E "