“We, the people” is an NGO working for rights of citizens. Due to nature of its activities, its volunteers take part in agitations which acquire…

CA Intermediate · Auditing and Ethics · MTP · May 2024
“We, the people” is an NGO working for rights of citizens. Due to nature of its activities, its volunteers take part in agitations which acquire political overtones. It also gets money from trusts based in overseas countries. The government has tightened regulatory mechanism for NGOs receiving foreign funding. The finance and accounts department in NGO is headed by an experienced person, a former volunteer and activist himself. However, he has no professional or legal educational background. CA N is appointed as auditor of above NGO for the first time. Choose the most appropriate option regarding audit risk inferred by you from above.
(A) Audit risk in the above situation is low.
(B) The situation does not provide quantitative data. Therefore, it is not possible to make a precise measurement of audit risk.
(C) Audit risk in the above situation is high.
(D) The situation does not provide information affecting all components of audit risk. Therefore, inference cannot be made properly.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

Audit risk in the above situation is high.

Topics: Special Features of Audit of Different type of Entities

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