ORIGINAL Z-SCORE (For Public Manufacturer) If the Z-Score is 3.0 or above - bankruptcy is not likely. If the Z-Score is 1.8 or less - bankruptcy is likely. A score between 1.8 and 3.0 is the gray area. Probabilities of bankruptcy within the above ranges are 95% for one year and 70% within two years. Obviously a higher Z-Score is desirable.
RISK is the measurable possibility of losing or not gaining value. Risk is different from uncertainty. Uncertainty is not measurable.
AUDIT STRATEGY is a game plan to attack audit issues before they are raised. Reasons and justifications for all positions must be understood and the foundation laid for taking the position.
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