Identify type of risks impacted (inherent vs control risk)

Why they are risks?

Discuss five risk factors to support your analysis?

 

Totally Yours staff consists of Julie, Karen, who is another full-time stylist, and three part time employees. There is another full-time esthetician, Emily, who operates a spa within Totally Yours, but she is not on the Totally Yours payroll as her business is a separate entity from Totally Yours. Emily has her own esthetics practice, Nails Art, located within the TYI premises. Nails Art is owned 100% by Emily. The last few times I have been in the salon, I noticed it doesn't seem like Emily and Julie are getting along well. Carrie and Kim are new graduates of a local hair school whom Julie hired in March of this year. Julie has often scheduled them together some nights since they seem to be really good friends and get along well. They are keen to work as much as possible to pay down their large student loans. Julie is hoping they bring in a lot of new clients to TYI. So far so good as they seem to have a lot of friends in the salon! Julie always used to answer the phones and book appointments herself, but Grace was hired two months ago to take on this role. When clients book an appointment, it is entered into a master schedule. This is maintained electronically so a historical record is available for each client. Julie has been so impressed with Grace that she has started letting her do the bank deposits and ring in clients when their services are complete. Sometimes when Grace is busy, stylists will ring in their clients themselves. Everyone has access to ringing in clients to ensure that customers are not kept waiting when their service is complete. Emily will often ring in Totally Yours clients for services and products sold as her clientele is still growing and she often is not busy. Sometimes Grace will ring in Nail Art clients as well when Emily is busy. TYI is seeking a loan to modify her storefront location. TYI has a three-year lease. Julie is not keen on the rent TYI is being charged at a rate of 5% of sales in addition to the $1,000 fixed amount per month. The lessor provided an upfront incentive of three months of free rent given that there have been some robberies in other locations in the same strip mall. TYI has a line of credit with covenants tied to working capital ratios. The bank requires the audited financial statements to be provided within two months of the year end. A breach of the covenants means that the line of credit will become payable on demand. Julie does not have sufficient cash flows to repay the loan if the bank were to call it. Julie purchases 85% of her products from "Maritime Supply" a local beauty supply shop. This includes products for sale as well for use during client services. Julie provides a 10% commission to employees who make a sale of a product and shows this separately on each employee's pay stub.