Reference no: EM133233487

Describe the inherent and control risks of material misstatement at the financial statement level for the information below:

You are the audit senior on the audit of Campus Limited, a private tertiary institution. The institutions' principal business activities are the provision of tertiary education with accredited courses at undergraduate to postgraduate levels. Campus Limited came into existence during 2012 with some struggles, however they have experienced substantial growth since the onset of Covid-19 in 2020. The institution initially operated as a fully contact university, however, due to the restrictions imposed due to Covid-19, a blended approach (contact and online lessons) was implemented. Over the ten years, a total of 10 000 students have graduated with considerable satisfaction on both teaching and student support. The institution also maintains their accreditation with professional bodies and the Council for Higher Education. Campus Limited must adhere to the Higher Education Act and JSE listing requirements. Campus Limited has two main campuses situated in Pretoria and Randburg. For additional space, a lease contract was entered into for an additional building during November 2021. Management have indicated they are struggling to fully implement IFRS 16 as personnel are still learning the requirements.

You have the following information available from the unaudited Integrated report as at year end 31 July 2022. Financial statements are prepared using International Financial Reporting Standards (IFRS) and JSE listing requirements.

Operational highlights:

- Significant capital expenditure on a new learner management system and the launch of an online merchandise store.

- Sound corporate governance structures including compliance with King IV.

- New premises leased allowing for increasing student numbers.

Operational challenges:

- Reduced operating profit due to increased capital expenditures in relation to the new learner management system and online merchandise store.

- Ongoing negotiations with staff regarding an 1.25% yearly increase on salaries resulting in protest action and low staff morale for academic and support staff.

- Increasing student debt balances due to decline of economic activities in the country because of the Covid-19 pandemic and impact on the economy.