Problem: You are considering the audit of Omega Super (OS), a company that manages superannuation investments for clients across Australia. Traditionally, OS has been the compulsory superannuation fund for staff in schools and universities and has grown to over $50 billion in funds under management. The Australian superannuation industry is highly regulated and no breaches by OS have ever been recorded. The CEO of OS, Karen King, is very proud of this record and has even written a book titled "Only fools break rules: How to build a compliance culture". Karen King has been the CEO of OS for six years and has just been appointed for another three-year term.
OS's objective is to grow to $100 billion in five years. However, recent changes in legislation have meant that new employees have a choice of superannuation fund and only 25% are choosing OS. In addition, many existing OS clients are transferring to other funds. Some media reports suggest that this may be due to OS's position on climate change, as Karen King is a long-time advocate of fossil fuels and much of OS's investments are in companies related to fossil fuels. OS is aware of this issue and has just launched a new marketing campaign with the tagline: "Omega Super - Standing for a Sustainable Future".
A group of climate change activists has just launched legal proceedings against OS on the grounds that such a large proportion of fossil fuel investments breaches the duty of OS to act in the long-term interests of members. Karen King has stated that she believes the claim is without merit and OS will use every resource possible to defend it.
Required:
Question 1: Based on the above information, list ONE factor that is relevant to assessing the integrity of OS. For this factor, explain whether OS seems to have high or low levels of integrity.
Question 2: Identify TWO business risks faced by OS. For each business risk, discuss how it might stop OS from meeting its business objectives.
Question 3: For ONE of the business risks you have chosen, explain how this may result in a material misstatement of an account balance. Name the account balance, whether the account is likely to be overstated or understated, and the audit assertion likely to be affected.