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NFFI_Controls_case - You a PA are considering audit risk at...

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You, a PA, are considering audit risk at the financial statement level in planning the audit of National Federal Financial Institution (NFFI) financial statements for the year ended December 31, 2007. Audit risk at the financial statement level is influenced by the risk of material misstatements, which may be indicated by a combination of factors related to management, the industry, and the entity. In assessing such factors, you have gathered the following information concerning NFFI’s environment. Company Profile NFB is a federally insured financial institution that has been consistently more profitable than the industry average by marketing mortgages on properties in a prosperous rural area, which has experienced considerable growth in recent years. NFFI packages its mortgages and sells them to large mortgage investment trusts. Despite a recent increase in interest rates, NFFI has been able to continue selling its mortgages as a source of new lendable funds. NFFI’s board of directors is controlled by Smith, the majority stockholder,
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