Answered: Identify the inherent risks for this…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A charitable organization relies for its funding on donations from the general public, which is mainly in the form of cash collected in the streets by volunteers and cheques sent by post to the charity's head office. Wealthy individuals occasionally provide large donations, sometimes on condition that the money is used for specific purpose.

The constitution of the charity specifies the purpose of the charity, and also states that no more than 15% of the charity's income each year may be spent on administration costs.

Required

Identify the inherent risks for this charitable organization that an auditor of its financial statements would need to consider.

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