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Hello Miss, referring to the answer in the AAA Mar/June 2016 Q3(b)(i) cash transfer [York Co]
“The amount which has been transferred represent 1.3% of total assets,which is material to the FS .The engagaent and particularly matters relating to cash transaction ,should now be considered as high risk and approached with a high degree of professional scepticism”
IF the amount involved is small and little each time and the accumulated amount transfered are not material to the total asset, will it conclude that its not high risk even there is some evidence that the client might involving in the money laundering? Should we still approach it with professional scepticism and consider it still high-risk area?
There are no hard-and-fast rules – materiality is subjective – risk is subjective – it all depends on the auditor’s judgement in the specific circumstances. I would say if, in the auditor’s opinion, the matter is unlikely to result in the risk of material misstatement he reports the matter to management and moves on.
For example, I remember being suspicious that a cashier was committing a fraud on petty cash – the matter was not material and sufficient controls were exercised in other areas that the risk was confined to petty cash – the matter was reported to management and the audit moves on. Even if it was proven that the petty cash did not exist there could be no misstatement in the financial statements.
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