On the basis of overall description of case study, what factors should be considered by CA Madhusudan while assessing audit risk of DBS Trust during…

For assessing audit risk, the auditor shall consider and examine all components of audit risk. DBS Trust is in receipt of substantial foreign contributions. It may make transactions inherently risky. The credibility and integrity of persons behind NGO is important. Shady NGOs can be involved in money laundering activities or in mis-utilizing funds received from donors. Besides, trust is over-zealous in in its approach and has been accused of stalling development projects. The auditor needs to assess whether trust continues to comply with conditions for registration under the FCRA. Non-compliance with provisions of the FCRA can make activities of NGO risky. It can have serious implications for the trust as it could lead to cancellation of FCRA certificate and other regulatory consequences. Drying up of foreign donations due to cancellation of FCRA certificate can hamper its activities badly as such donations are its main source of funding. Therefore, it requires proper assessment of control risk that control systems and procedures are operating effectively to comply with provisions of the FCRA. The auditor is conducting audit of trust for the first time. Therefore, it may lead to higher detection risk due to inappropriate sampling procedures or faulty application of audit procedures.