Required: Based on the discussion with the client,

1. determine wheather the factor discussed is an internal or external factor.

2. determine whether this factor most likely increases, decreases, or has no effect on the risk of material misstatement.

Information from Client Inquiry
1. Rock Chalk Corp has expanded in recent years and has multiple stores located across the country.
2. A new revenue recognition standard was recently issued, and Rock Chalk Corp transitioned to the new standards in the current year.
3. The board of directors participates actively in overseeing the management of Rock Chalk Corp and is willing to ask difficult questions. The board of directors is compenstated by Rock Chalk Corp.
4. Since the successful launch of Rock Chalk Corp, the market competition has increased greatly. New companies have emerged, and Rock Chalk Corp is worried that its customers may start to shop at other places.