Bond, CPA, is considering audit risk at the financial statement level in planning the audit of Toxic Waste Disposal (TWD) Company's financial statements for the year ended December 31, 20X6. TWD is a privately owned entity that contracts with municipal governments to remove environmental wastes. Audit risk at the financial statement level is influenced by the risk of material misstatements, which may be indicated by a combination of factors related to management, the industry, and the entity. Based only on the information below, indicate whether each of the following factors would most likely increase, decrease, or have no effect on audit risk and the risk of material misstatement. 1. This was the first year TWD operated at a profit since 2009 because the municipalities received increased federal and state funding for environmental purposes.
2. TWDâs board of directors is controlled by Mead, the majority stockholder, who also acts as the chief executive officer.
3. The internal auditor reports to the controller, and the controller reports to Mead.
4. The accounting department has experienced a high rate of turnover of key personnel.
5. TWDâs bank has a loan officer who meets regularly with TWDâs CEO and controller to monitor TWDâs financial performance.
6. TWDâs employees are paid biweekly.
7. Bond has audited TWD for five years