Tag (SQ): Charity Audit

BrightPath Charity is a non-profit organization whose constitution requires that it raises funds for educational projects. These projects seek to educate children and support teachers in various developing regions. Charities in the region where BrightPath Charity is based have recently become subject to new audit and accounting regulations. Charity income consists of cash collections at fundraising events, telephone appeals, and bequests (money left to the charity by deceased persons). The charity is small and the trustees do not consider that the charity can afford to employ a qualified accountant. The charity employs a part-time bookkeeper and relies on volunteers for fundraising. Your firm has been engaged as accountants and auditors to this charity because of the new regulations. Financial statements have been prepared (but not audited) in the past by a volunteer who is a recently retired Chartered Accountant.

Required:

(a) Describe the risks associated with the audit of BrightPath Charity under the headings inherent and control risks and detection risk and explain the implications of these risks for overall audit risk.

(b) List and explain the audit tests to be performed on income and expenditure from fundraising events.