Moranda and Sills, LLP, has served for over 10 years as the auditor of the financial statements
Question:
Moranda and Sills, LLP, has served for over 10 years as the auditor of the financial statements of Highland Credit Union. The firm is conducting its audit planning for the current fiscal year and is in the process of performing risk assessment procedures. Based on inquiries and other information obtained, the auditors learned that the credit union is finalizing an acquisition of a smaller credit union located in another region of the province. Management anticipates that the transaction will close in the third quarter, and, while there will be some challenges in integrating the IT systems of the acquired credit union with Highland systems, the bank should realize a number of operational cost savings over the long-term.
During the past year, the credit union has expanded its online service options for customers, who can now remotely deposit funds into and withdraw funds from chequing and savings accounts.
The system has been well received by customers and the credit union hopes to continue expanding those services. The challenge for Highland is that they are struggling to retain IT personnel given
the strong job market for individuals with those skills.
Credit risk management continues to be a challenge for all credit unions, including Highland, and regulators continue to spend a lot of time on credit evaluation issues. The credit union has a dedicated underwriting staff that continually evaluates the collectibility of loans outstanding.
Unfortunately, some of the credit review staff recently left the credit union to work for a competitor.
Competition in the community banking space is tough, especially given the slow loan demand in the marketplace.
The credit union has expanded its investment portfolio into a number of new types of instruments subject to fair value accounting. Management has engaged an outside valuation expert to ensure that the valuations are properly measured and reported.
Fortunately, the credit union’s capital position is strong and it far exceeds regulatory minimums.
Capital is available to support growth goals in the credit union’s three-year strategic plan.
REQUIRED
a. Describe any risks of material misstatement at the financial statement level.
b. Describe any risks of material misstatement at the assertion level.
c. For each risk factor, indicate whether it is a significant risk.
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley