Risk Factors – NBC Institute

AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

Question

Fela Idaewor is the auditor for Matty Co. Ltd, a rapidly expanding retail business based in Lekki. This is her first year as the audit manager. During her engagement planning, she observed multiple risk factors, such as the company’s strong interest in maintaining earnings and share prices, unrealistic financial forecasts, and high reliance on debt financing for expansion. Additionally, there were strong indications that fraud might have been committed by top management.

Required
(a) What should Idaewor do about the possibility of fraud at the planning stage? (7 Marks)
(b) What documentation is required for identifying risk factors? (5 Marks)
(c) If Idaewor has evidence suggesting fraud, what are her communication responsibilities to management? (3 Marks)

Answer

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Tags: Audit Planning, Fraud Detection, Management Communication, Professional Skepticism, Risk Factors
Level: Level 3

Topic: Application of Audit and Assurance Principles
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

Question

Which ONE of the following may not necessarily be a symptom of a going concern problem?

A. Redemption of debentures
B. Dividends in arrears
C. Existence of long overdue debtors
D. Heavy dependence on short-term funds for long-term needs
E. Excessive reliance on a supplier or customer

Answer

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Tags: Audit Assessment, Financial Indicators, Going Concern, Risk Factors
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2011

AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits

Explain materiality, benchmarks, and factors affecting materiality determination in audits.

Question

The audit plan and scope was presented to the Audit Committee of Deinde Limited for the year ended December 31, 2020. The external auditors of the company stated:

“We would estimate materiality using profit before tax for the full year. We would estimate our preliminary materiality based on expected results for the full year. We will perform a materiality re-assessment at year-end to confirm adequacy or otherwise of our preliminary materiality. We will report to the Audit Committee on all unadjusted misstatements greater than our established threshold unless they are qualitatively immaterial.”

Your uncle, who is a member of the Audit Committee, discussed this matter with you and requested that you explain the issue further.

Required:

a. Explain the concepts of materiality and performance materiality in an audit of financial statements.

(3 Marks)

b. Explain the benchmark for determining materiality. (5 Marks)

c. Discuss the factors that may affect the identification of an appropriate benchmark. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Benchmarks, Financial Statement Audit, ISA Standards, Materiality, Performance Materiality, Risk Factors
Level: Level 3

Topic: Risk Management in Audits
Series: NOV 2022

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

Question

i. Discuss objective and subjective risk perception. (4 Marks)

ii. Explain, with examples, related and correlated risk factors. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Correlated Risks, Objective Risk, Related Risks, Risk Factors, Risk Perception, Subjective Risk
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2018

SCS – May 2020 – L3 – Q3 – Competitive Advantage

Identify three key factors that must be addressed for Customer Focused Ltd to remain sustainable in the short term.

Question

Customer Focused Ltd has updated its management accounts (Exhibit 1) to produce a
forecast for the year 2020 and these have indicated some significant problems. The business
owners are unsure what to do next.
Required:
You are acting as an advisor to the company and they ask you to:

Based on your work in Questions 1 and 2, identify and explain three key factors which must be addressed for Customer Focused Ltd to be sustainable over the short term.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business performance, Risk Factors, Strategic Analysis, Sustainability
Level: Level 3

Topic: Competitive Advantage
Series: MAY 2020

AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Planning, Fraud Detection, Management Communication, Professional Skepticism, Risk Factors
Level: Level 3

Topic: Application of Audit and Assurance Principles
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

Question

Which ONE of the following may not necessarily be a symptom of a going concern problem?

A. Redemption of debentures
B. Dividends in arrears
C. Existence of long overdue debtors
D. Heavy dependence on short-term funds for long-term needs
E. Excessive reliance on a supplier or customer

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Assessment, Financial Indicators, Going Concern, Risk Factors
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2011

AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits

Explain materiality, benchmarks, and factors affecting materiality determination in audits.

Question

The audit plan and scope was presented to the Audit Committee of Deinde Limited for the year ended December 31, 2020. The external auditors of the company stated:

“We would estimate materiality using profit before tax for the full year. We would estimate our preliminary materiality based on expected results for the full year. We will perform a materiality re-assessment at year-end to confirm adequacy or otherwise of our preliminary materiality. We will report to the Audit Committee on all unadjusted misstatements greater than our established threshold unless they are qualitatively immaterial.”

Your uncle, who is a member of the Audit Committee, discussed this matter with you and requested that you explain the issue further.

Required:

a. Explain the concepts of materiality and performance materiality in an audit of financial statements.

(3 Marks)

b. Explain the benchmark for determining materiality. (5 Marks)

c. Discuss the factors that may affect the identification of an appropriate benchmark. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Benchmarks, Financial Statement Audit, ISA Standards, Materiality, Performance Materiality, Risk Factors
Level: Level 3

Topic: Risk Management in Audits
Series: NOV 2022

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

Question

i. Discuss objective and subjective risk perception. (4 Marks)

ii. Explain, with examples, related and correlated risk factors. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Correlated Risks, Objective Risk, Related Risks, Risk Factors, Risk Perception, Subjective Risk
Level: Level 2

Topic: Risk Management and Corporate Strategy
Series: MAY 2018

SCS – May 2020 – L3 – Q3 – Competitive Advantage

Identify three key factors that must be addressed for Customer Focused Ltd to remain sustainable in the short term.

Question

Based on your work in Questions 1 and 2, identify and explain three key factors which must be addressed for Customer Focused Ltd to be sustainable over the short term.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business performance, Risk Factors, Strategic Analysis, Sustainability
Level: Level 3

Topic: Competitive Advantage
Series: MAY 2020

Question Tag: Risk Factors

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AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits

Explain materiality, benchmarks, and factors affecting materiality determination in audits.

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

SCS – May 2020 – L3 – Q3 – Competitive Advantage

Identify three key factors that must be addressed for Customer Focused Ltd to remain sustainable in the short term.

AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits

Explain materiality, benchmarks, and factors affecting materiality determination in audits.

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

SCS – May 2020 – L3 – Q3 – Competitive Advantage

Identify three key factors that must be addressed for Customer Focused Ltd to remain sustainable in the short term.

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AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles"

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions"

AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits

Explain materiality, benchmarks, and factors affecting materiality determination in audits.

You're reporting an error for "AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits"

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

You're reporting an error for "MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy"

SCS – May 2020 – L3 – Q3 – Competitive Advantage

Identify three key factors that must be addressed for Customer Focused Ltd to remain sustainable in the short term.

You're reporting an error for "SCS – May 2020 – L3 – Q3 – Competitive Advantage"

AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles"

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions"

AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits

Explain materiality, benchmarks, and factors affecting materiality determination in audits.

You're reporting an error for "AAA – Nov 2022 – L3 – SC – Q7 – Risk Management in Audits"

MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy

Discusses the differences between objective and subjective risk perception and explains related and correlated risk factors.

You're reporting an error for "MGE – May 2018 – L2 – Q4b – Risk Management and Corporate Strategy"

SCS – May 2020 – L3 – Q3 – Competitive Advantage

Identify three key factors that must be addressed for Customer Focused Ltd to remain sustainable in the short term.

You're reporting an error for "SCS – May 2020 – L3 – Q3 – Competitive Advantage"

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