(a) Inherent risk factor(s) to which each of the (b) Assessment of each risk, citing reasons for
identified risks of material misstatement your assessment, according to its
relates • magnitude (1 mark)
• likelihood (1 mark) and
• placement on the spectrum of inherent risk
(1 mark)
1. Change and Uncertainty Magnitude – High because financial statements
as a whole will be materially misstated if they
are prepared on the going concern basis when
in reality the entity does not satisfy the going
concern.
Likelihood -Low to medium since the audit
committee has the chief financial officer (CFO),
Dinah Maseko, who is a registered chartered
accountant which are expected to aware of
issues that threaten the going concern of an
entity.
, Spectrum of inherent risk- Medium to high
since likelihood is mlow to medium and
magnitude is high
2. Susceptibility to misstatement due to Magnitude – High as it affects the business
other fraud risk factors operations as a whole or there are numerous
transactions locally and internationally and/or
there is also a potential risk for fraud.
Likelihood – High as there are many
contributing going concern factors identified
and/or management might be motivated to
commit fraud to reflect a healthy financial
position.
Spectrum of inherent risk- This risk can
therefore be placed on the higher/upper end of
the spectrum of inherent risk.
This is a significant risk
3. Complexity and change Magnitude –medium/high as Eggcellent
Poultry Suppliers Limited is a listed and non-
compliance with JSE requirements may
therefore may have a huge impact on the AFS.
Likelihood – Low since EPS has lawyers that
advise it on relevant laws and regulations.
However, due the fact that there is outstanding
fees payable to the lawyers, there are chances
that the lawyers may no longer advise the
entity which can increase the likelihood.
identified risks of material misstatement your assessment, according to its
relates • magnitude (1 mark)
• likelihood (1 mark) and
• placement on the spectrum of inherent risk
(1 mark)
1. Change and Uncertainty Magnitude – High because financial statements
as a whole will be materially misstated if they
are prepared on the going concern basis when
in reality the entity does not satisfy the going
concern.
Likelihood -Low to medium since the audit
committee has the chief financial officer (CFO),
Dinah Maseko, who is a registered chartered
accountant which are expected to aware of
issues that threaten the going concern of an
entity.
, Spectrum of inherent risk- Medium to high
since likelihood is mlow to medium and
magnitude is high
2. Susceptibility to misstatement due to Magnitude – High as it affects the business
other fraud risk factors operations as a whole or there are numerous
transactions locally and internationally and/or
there is also a potential risk for fraud.
Likelihood – High as there are many
contributing going concern factors identified
and/or management might be motivated to
commit fraud to reflect a healthy financial
position.
Spectrum of inherent risk- This risk can
therefore be placed on the higher/upper end of
the spectrum of inherent risk.
This is a significant risk
3. Complexity and change Magnitude –medium/high as Eggcellent
Poultry Suppliers Limited is a listed and non-
compliance with JSE requirements may
therefore may have a huge impact on the AFS.
Likelihood – Low since EPS has lawyers that
advise it on relevant laws and regulations.
However, due the fact that there is outstanding
fees payable to the lawyers, there are chances
that the lawyers may no longer advise the
entity which can increase the likelihood.
