10-K Link:
https://www.sec.gov/Archives/edgar/data/27419/000002741919000006/tgt-
20190202x10k.htm#sA62F5029548655009B6504DA0274EEA9
Target mentions a competitive and reputational risk being the potential
inability to provide a relevant and reliable experience for their guests, resulting
in less sales, negative reputation, and poor results of operations. Frequently
changing customer preferences and advancements in competitor experiences
must be taken into account, otherwise customers may choose to go elsewhere.
This would result in an overstatement of receivables and revenue when
creating a budget or estimating figures for the year. Target also lists an
investment risk being the potential for appropriate returns not being met as a
result of capital investments in remodeling and building stores and
technological improvement. This would harm their financial condition by not
seeing the expected revenue from assuming the payables (Target Corporation
Form 10-K, n.d.).
To mitigate the competitive and reputational risk, an auditor might create an
inquiry and observational test. Inquiry methods are straight-forward, and this
may involve interviewing customers. Such as surveys being sent to customers
regarding the opinion of Target and its offerings. The auditor would then look
at this data and determine whether Target is meeting the demand. An
observational test can be done by an auditor a by seeing where any necessary
changes were implemented. They may then compare sales to those prior to the
changes and determine how effective the changes were. To mitigate
investment risks an auditor may create an examination or inspection of
evidence test (Gallagher, 2022). The auditor will check performances of
remodeled and newly built stores and compare them to older ones to determine
the level of success and profitability. This will help Target decide whether
their investments were useful.
Reference List:
Gallagher, B. (2022, April 27). 5 Types of Testing Methods Used During Audit
Procedures. I.S. Partners. Retrieved August 2, 2022, from
https://www.ispartnersllc.com/blog/five-types-testing-methods-used-audits/
Target Corporation Form 10-K. (n.d.). United States Security and Exchange
Commission. Retrieved August 2, 2022, from
https://www.sec.gov/Archives/edgar/data/27419/000002741919000006/tgt-
20190202x10k.htm#sA62F5029548655009B6504DA0274EEA9
