Identifying Business and Financial Risks in the Cannabis Industry

Abstract

The House of Representatives recently passed the Marijuana Opportunity Reinvestment and Expungement Act, to remove marijuana from the federal controlled substances list (pending Senate approval as of April 2022). This case provides a hands-on learning experience for both undergraduate and graduate students to critically apply audit risk assessment and planning concepts to a specific “sin” industry, cannabis. Students are presented with a fictitious publicly traded cannabis company whose business operations include the cultivation and selling of cannabis, looking to expand into new markets. The case is structured to guide students through an open concept case where students perform risk assessment of the business risks, industry risks, operations risk, and financial reporting quality in this emerging industry to develop a written audit plan and then present their findings.  Finally, this case provides an opportunity to research a specific industry and identify, analyze, evaluate audit concepts in an industry public accounting firms are expanding their services in.