Toll Brothers faces many business risks that could threaten the company’s ability to satisfy stockholder expectations. Toll Brothers compete in a very competitive environment and this being said, if one of Toll Brothers competitors were to change their plans it could negatively affect them. Not only can the competitors negatively affect Toll Brothers but also the general economic and market conditions. The terrorist attacks that occurred on September 11th also have a great impact on Toll Brothers causing uncertainty of other terrorist attacks. In order to build communities there must be many permits and approvals attained. Time delays in obtaining these permits and approvals create another business risk for Toll Brothers. Toll Brothers also has to worry about their interest rate on their credit facility, at any time the rate can increase. Also, with this economic downturn, many people aren’t in a good financial position to purchase luxury homes, which could greatly affect Toll Brothers. Toll Brothers also have uncertainty in terms of their recorded tax balances, which could pose a huge problem.
There are many control activities that Toll Brothers can implement to reduce these business risks. Toll Brothers can take both preventive actions and detective actions. Some examples of preventative actions that Toll Brothers can do are separation of duties, proper authorization, adequate documentation, and physical control over assets. In terms of detective actions, Toll Brothers can perform reviews, analyses, variance analyses, reconciliations, physical inventories and audits. By performing these actions, Toll Brothers could potentially reduce their risks, have a more accurate idea of their finances and could potentially prevent undesirable events from occurring.
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