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”Control risk will increase as internal controls
may be weak due to the large number of
volunteers used by EuKaRe” this is said to be false in the answer but:study text says: ”Some NFP entities, particularly small charities, may have weaker control
systems due to:
• the use of volunteers, who are likely to be unqualified and have little
awareness of the importance of controls”’can you explain why according to bpp answer the statement is false?
If control risk is 100% – which is the “default” assessment unless tests of controls are performed to confirm their operating effectiveness – it can’t further increase. So you could say control risk will be 100% – but you can’t say it will increase.
To be honest, we don’t really talk about control risk increasing/decreasing since ISA 315 (Revised 2019).
Look on pages 56 and 57 of the notes. Inherent risk is assessed – say high is 100%, medium is 70% and low is 40%.
The auditor assesses control risk by testing the operating effective of controls. If the auditor does NOT plan to test controls, “the combined assessment of RoMM is the same as the assessment of inherent risk”.
So if IR is 70%, RoMM is also 70% which means CR is 100% (70% x 100% = 70%).
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