High Risk Aspects of NFP Audit

This company is about to undergo a change in ownership. Since the financial statements were produced by the person who is most affected by the report, there is sufficient bias to warrant extra attention to certain accounts. There is also evidence of possible attempts by Mr. Newman to increase the company's expenses. These issues require increased audit testing.

Mr. Kramer, as the sole owner in 2004, is the first party to the audit. He would have been biased to decrease net income in an effort to lower taxes. His control of the company made affecting the financial statements possible.

The Kramer family, as the present owners, are the second party. They would be biased to keep income high in 2005 to maximize the selling price of the company. However, they have no role

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Category: Business - H