Instructions $($MODIFIED$)$:

You have now completed the AU$-$C Readings in this course. Assume that you are part of the CPA firm described below. Use the information provided and your overall knowledge and experience to perform the risk assessment for the audit of Deneden Medical Equipment, Inc. for the year ended December $2022.$

Below is the brief description of the issues at Deneden:

Koloko CPAs, Inc., is currently performing the audit of Deneden Medical Equipment, Inc. for the year ended December $31,2022.$ Deneden Medical Equipment, Inc. is a global company with its headquarters in Massachusetts, USA. The company has a substantial business operation in China and Indonesia where $25\%$ or more of the Company's consolidated revenues is generated. The medical equipment industry is highly regulated as to product or device quality, safety, and device effectiveness. Koloko CPAs has audited Deneden Medical Equipment, Inc. since $2021,$ and Deneden's management has been stable with no management turnover reported.

Based on your own assessment of the description of Deneden Medical Equipment, Inc current situation:

QUES: Rate the likelihood that the financial statements of Deneden Medical Equipment and Supplies Corp contains a material misstatement.

Use the following guide in performing your risk assessment.

$10-20\%=$ Lowest Likelihood

$20-40\%=$ Low Likelihood

$50-60\%=$ Medium Likelihood

$70-80\%=$ High Likelihood

$90-100\%=$ Highest Likelihood