Using the 2019 annual report of the two assigned companies (Linamar Corporation – graduate researcher

Using the 2019 annual report of the two assigned companies (Linamar Corporation and Magna
International Inc.). To access the 2019 annual report of Linamar Corporation and Magna International Inc., use
the following links:
https://www.linamar.com/wp-content/uploads/2021/08/2019-Annual-Report.pdf
https://www.magna.com/company/investors/financial-reports-public-filings/annual-reports
The research paper or my part will consist of the following:
Risk Analysis: 8pages
(A) Operational and Market Risk: Review the Management Discussion and Analysis Section of the Annual Reports of the two assigned companies and discuss the operational and market risk factors.
(B) Financial Reporting (Fraud) Risks: Evaluate the pressure on the management of the two companies to commit fraud. Also, evaluate the opportunity for fraud by considering the effectiveness of the internal controls or corporate governance structures of the two companies.
Fraud Triangle: 4 pages
Note that the 3 corners of the fraud triangle are Pressure, Opportunity, and Rationalization.
The risk of fraud is HIGH if Incentive/Pressure is high; the Opportunity to commit fraud is high, and there is Rationalization (the fraud can be rationalized by the perpetrator).
(i) Examples of scenarios where Incentive/Pressure is HIGH:
Potential violation or debt covenants or agreements; high proportion of management (top
officers of the Company) compensation in the form of stock options; increased competition
within the industry; technology changes; economic recession; upcoming issuance or sale of
new stock or bonds by the company.
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15 EMBA 7010 Financial & Managerial Accounting
(ii) Examples of scenarios where Opportunity to commit fraud is HIGH:
Internal Control risk is high: The risk that the controls will fail to prevent or detect and correct
fraud and other irregularities. Note that the control environment is one of the most important
components of internal control. Further, one of the key components of an effective control
environment is effective corporate governance.