What is a common challenge faced when auditing high-risk entities?

When auditing high-risk entities, an expanded scope of the audit is often necessary to thoroughly assess risks and compliance requirements. High-risk entities typically operate in environments where the potential for fraud, money laundering, or other financial crimes is heightened. As such, auditors must delve deeper into the operations, transactions, and controls of these entities to identify any irregularities or vulnerabilities.

This expanded scope may involve looking beyond standard financial audits to include comprehensive reviews of operational, compliance, and risk management practices. The increased complexity and volume of information reviewed ensures that auditors can provide a well-rounded evaluation of the entity's risk exposure and operational integrity. In high-risk situations, focusing solely on the basic financial statements would likely lead to a superficial understanding and potentially miss critical compliance and regulatory issues that could have severe implications for the entity and its stakeholders.