Inherent Risk – NBC Institute

AAA – May 2017 – L3 – Q2 – Risk Management in Audits

Describe audit risk and its components, and identify inherent risks in auditing a charity.

Question

Home Care is a charity that provides accommodation for unemployed young people.
The constitution of the charity explains how the charity’s income could be spent and also contains a requirement that administrative expenditure cannot exceed 10% of income in any year.

The charity’s income is mainly derived from voluntary cash donations collected by volunteers from members of the public. Recently, the charity’s income has been impacted by the current global economic and financial meltdown.

Required:

a. Describe the term ‘audit risk’ and explain the THREE elements of risk that contribute to total audit risk. (8 Marks)

b. Using the information provided in the question, identify FOUR areas of inherent risk to be taken into account in planning the audit of Home Care and explain the effect of each of these risks on the audit approach. (12 Marks)

Answer

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Tags: Audit Planning, Audit Risk, Charities, Inherent Risk, Risk Assessment
Level: Level 3

Topic: Risk Management in Audits

CSME – Nov 2023 – L2 – Q4 – Ethics in Business

Discuss the relationship models between accountants and clients, recommending the most suitable and least suitable models.

Question

There are different models of relationship between a professional accountant and his/her clients. In the context of the above:

a. Explain the different models of relationship between a professional accountant and his/her clients. (16 Marks)

b. Which of the models in (a) above would you recommend, and which do you consider to be the least recommended? (Provide justification for your choices) (4 Marks)

Answer

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Tags: Audit Approach, Client Relationships, Control Environment, Inherent Risk, Nonprofit risk management, Professional Ethics
Level: Level 2

Topic: Ethics in Business

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

Question

Greater Tomorrow Foundation (GTF) was established with the aim of providing support to children from disadvantaged backgrounds who wish to participate in sports, such as tennis, athletics, and football. It has benefited the country, with some beneficiaries representing the nation in international competitions.

GTF has a constitution detailing how income can be spent and limits administrative expenditure to one-eighth of its income annually.

GTF’s income comes solely from voluntary donations, including:

Cash collected by volunteers from the public.
Direct donations from generous individuals.

Certain donations specify that the principal amount cannot be spent, with income generated (interest) allocated to specific activities, like providing sports equipment (e.g., footballs, boots, rackets, sportswear, etc.).

Required:

a. Explain FIVE areas of inherent risk in Greater Tomorrow Foundation (GTF) and explain the effect of each risk on the audit approach. (10 Marks)

b. Explain FIVE reasons why the control environment may be weak in GTF. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Approach, Compliance, Control Environment, Donations, Financial Controls, Inherent Risk, Non-profit
Level: Level 2

Topic: Audit of Public Sector Entities

AAA – May 2017 – L3 – Q2 – Risk Management in Audits

Describe audit risk and its components, and identify inherent risks in auditing a charity.

Question

Required:

a. Describe the term ‘audit risk’ and explain the THREE elements of risk that contribute to total audit risk. (8 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Planning, Audit Risk, Charities, Inherent Risk, Risk Assessment
Level: Level 3

Topic: Risk Management in Audits

CSME – Nov 2023 – L2 – Q4 – Ethics in Business

Discuss the relationship models between accountants and clients, recommending the most suitable and least suitable models.

Question

There are different models of relationship between a professional accountant and his/her clients. In the context of the above:

a. Explain the different models of relationship between a professional accountant and his/her clients. (16 Marks)

b. Which of the models in (a) above would you recommend, and which do you consider to be the least recommended? (Provide justification for your choices) (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Approach, Client Relationships, Control Environment, Inherent Risk, Nonprofit risk management, Professional Ethics
Level: Level 2

Topic: Ethics in Business

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

Question

GTF has a constitution detailing how income can be spent and limits administrative expenditure to one-eighth of its income annually.

GTF’s income comes solely from voluntary donations, including:

Cash collected by volunteers from the public.
Direct donations from generous individuals.

Required:

a. Explain FIVE areas of inherent risk in Greater Tomorrow Foundation (GTF) and explain the effect of each risk on the audit approach. (10 Marks)

b. Explain FIVE reasons why the control environment may be weak in GTF. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Approach, Compliance, Control Environment, Donations, Financial Controls, Inherent Risk, Non-profit
Level: Level 2

Topic: Audit of Public Sector Entities

Question Tag: Inherent Risk

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AAA – May 2017 – L3 – Q2 – Risk Management in Audits

Describe audit risk and its components, and identify inherent risks in auditing a charity.

Required:

CSME – Nov 2023 – L2 – Q4 – Ethics in Business

Discuss the relationship models between accountants and clients, recommending the most suitable and least suitable models.

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

AAA – May 2017 – L3 – Q2 – Risk Management in Audits

Describe audit risk and its components, and identify inherent risks in auditing a charity.

Required:

CSME – Nov 2023 – L2 – Q4 – Ethics in Business

Discuss the relationship models between accountants and clients, recommending the most suitable and least suitable models.

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

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Question Tag: Inherent Risk

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AAA – May 2017 – L3 – Q2 – Risk Management in Audits

Describe audit risk and its components, and identify inherent risks in auditing a charity.

Required:

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CSME – Nov 2023 – L2 – Q4 – Ethics in Business

Discuss the relationship models between accountants and clients, recommending the most suitable and least suitable models.

You're reporting an error for "CSME – Nov 2023 – L2 – Q4 – Ethics in Business"

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

You're reporting an error for "AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities"

AAA – May 2017 – L3 – Q2 – Risk Management in Audits

Describe audit risk and its components, and identify inherent risks in auditing a charity.

Required:

You're reporting an error for "AAA – May 2017 – L3 – Q2 – Risk Management in Audits"

CSME – Nov 2023 – L2 – Q4 – Ethics in Business

Discuss the relationship models between accountants and clients, recommending the most suitable and least suitable models.

You're reporting an error for "CSME – Nov 2023 – L2 – Q4 – Ethics in Business"

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

You're reporting an error for "AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities"

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