Securimax Limited has been an audit client of KFP Partners for the past 15 years. Securimax is
Question:
Securimax Limited has been an audit client of KFP Partners for the past 15 years. Securimax is based in Waterloo, Ontario, where it manufactures high-tech armour-plated personnel carriers. Securimax often has to go through a competitive market tender process to win large government contracts. Its main product, the small but powerful Terrain Master, is highly specialized, and Securimax does business only with nations that have a recognized, democratically elected government. Securimax maintains a highly secure environment, given the sensitive and confidential nature of its vehicle designs and its clients.
In September 2023, Securimax installed an off-the-shelf costing system to support the highly sophisticated and cost-sensitive nature of its product designs. The new system replaced a system that had been developed in-house, as the old system could no longer keep up with the complex and detailed manufacturing costing process that provides tender costings. The old system also had difficulty with the company’s broader reporting requirements.
The manufacturing costing system uses all of the manufacturing unit inputs to calculate and produce a database of all product costs and recommended sales prices. It also integrates with the general ledger each time there are product inventory movements such as purchases, sales, wastage, and damaged inventory losses.
Securimax’s financial year end is December 31.
The following are a list of industry and entity level factors impacting the inherent risk of Securimax:
1. High sensitivity of product information
2. High reliance on one product
3. Risk of selling to allies which later become enemies
4. Competitive market tendering to win government contracts
5. Pricing of sophisticated product designed to meet customer specifications
6. New inventory costing system
Which of the following correctly categorizes the items as entity level and industry level factors?