AUDITING: Covalon Technologies Ltd is an incorporated public company. Its principal business is to research, develop, and manufacture various patent-protected medical products that heals or improves infections, tissue repair, wound care, and surgical procedures; This industry has a low level concentration, without the monopoly of any big firm (Government of Canada). Besides this, Covalon is marketing and selling its products nationally and worldwide.

The Company generates its revenues through development contracts, licensing agreements, distribution contracts, and sales of two major product categories: patented products labeled with the Company’s name, and medical products for other medical companies under development and license contracts.

The global market projects the increase of the demand for those products due to the aging population, and the profits will reach over USD 75 billion by 2026. In 2020, North America accounted for the largest share of the infection control and wound care markets (Cision, 2021)(Fortune Business insights, 2020). However, one of the biggest issues is the ability of Canadian companies to compete with other countries because of factors like cost, availability of skilled employees, and market attractiveness. Adding the reliance to the overseas suppliers which makes the supply chain vulnerable to disruptions risk. Recently, Covalon started expanding its contracts to the Middle East and Latin America where legislation encourages foreign businesses to enter their markets, especially the medical device one (Government of Canada).
The company invests in R&D and acquires new technologies to stay competitive. Covalon Technologies Ltd. is” ISO 13485: 2016[1], MDSAP[2] and FDA QSR[3] certified, and follows strict GMP processes to support product development from concept to scalable market release” (Covalon, 20210. The federal government funds health-related research programs and offers “The Canadian Scientific Research and Experimental Development (SR&ED) tax incentive program” to encourage Canadian businesses to conduct R&D in Canada by providing claimants with cash refunds and/or tax credits for their expenditures on R&D (Government of Canada).

The Company is listed on the TSX, having the symbol COV. The Company also trades on the OTCQX Best Market, having the symbol of CVALF. The address of the Company’s corporate office and principal place of business is 1660 Tech Avenue, Unit 5, Mississauga, Ontario, Canada.

QUESTION:
Perform a fraud risk assessment and give 5 key fraud risks for this company along with overall conclusion on fraud risk level.