1. HS's board of directors is controlled by George Waltson, the majority shareholders, who also acts as the chief executive officer. Management at the company's branch offices has authority for directing and controlling HS's operations and is compensated according to branch profitability. The internal auditor reports directly to Henrry Stevenson, a minority shareholders, who is chairman of the audit committee.
2. The accounting department has experienced little turn over in personnel during the five years for which Audrey has audited HS. HS"s formula constantly underestimates the allowance for loan losses, but its financial controller has always been receptive to Audrey's suggestions to increase the allowance.
REQUIRED:
Based only on the information above, indicate the factors that would affect the risk of material mistatement and explain why?