4.6 - Climate Related Issues and the Possible Risks of Material Misstatement

Question 1

If there are adverse weather events, damaged crops cannot go into food production. What material misstatement could this result in?

Answer 1

Manipulation of financial statements in order to avoid reporting reduced profit margins from either higher costs or lower revenues

Question 2

If there are greenhouse gas emissions from livestock, there could be an imposed switch to more environmentally friendly forms of farming. What material misstatement could this result in?

Answer 2

Uncertainty over asset values for agricultural producers and revenue risk for retailers no longer selling certain products

Question 3

If consumers demand for more renewable forms of energy, there could be changes made to a product. What material misstatement could this result in?

Answer 3

Existing inventory and manufacturing equipment may not be viable leading to possible overstatement if not reviewed

Question 4

There is a risk of non-compliance with laws and regulations - what kind of risk would this be?

Answer 4

Inherent risk, as would the risk that assets become impaired

Question 5

What else may be at risk?

Answer 5

The going concern assessment of a company