Question Tag: Inherent Risks

Insurgency Relief Providers (IRP) is a non-governmental organization set up by a popular philanthropist from the southwest part of the country. The philanthropist sits as the chairman of the board of trustees and has a manager who is a close relative of the chief executive officer. All the management activities are in the hands of the manager, and the board of trustees sits occasionally to formalize major decisions. Initially, the sum of ₦50,000,000 was provided by the philanthropist, and fundraising was organized to raise an additional ₦200,000,000 in cash and pledges by political associates. The activity of IRP has been carried out with these and other donations from friends and well-wishers.

Activities of IRP are essentially performed in the northeastern region of the country. These activities include food and material supply using chartered vehicles and police/military escorts. The distribution is carried out with the involvement of some staff of the NGO who travel by air and within the safe zones of the region.

Due to the successes recorded and the need to increase these activities, the chairman of the board of trustees has made appeals to some foreign-friendly associates to be involved in his organization’s activities by providing financial support. A number of these organizations have shown interest and would want to review the operational activities and financial statements of IRP over the past three years.

For the purpose of the current request from foreign associates and other agencies, a statutory audit of the financial statements is required.

Your firm was appointed and has accepted the engagement.

Required:
a. Assess the inherent risks associated with the audit of the financial statements of IRP. (10 Marks)
b. Identify FIVE audit risks to be addressed by the auditor. (5 Marks)