Question

1. Define AAR: Then discuss how each of the following items can affect your assessment of AAR -Be specific

1. Third Party Use of Financials
2. Possibility of Financial difficulties
3. Management Integrity
4. What was your assessment of AAR and which of these was the most important for your assessment.

AAR = Acceptable Audit Risk

Answer 1

AAR - Acceptable audif fisk is the Risle that the auditor be willing to taken of giving an enqualiped ophon when the financial statement are milenialy misstated. As acceptable quelit Risk increases. The auditor is willing to collect loon enidence (innerse) and therefore accept a higher dikehon friste (direct), There are 3 types of Audit fiska Inherent Risk . dekchion fisks and Controll Risks » Shona Lisk management accross the extendoel enterprise can be wronged by best acheived by embedding Third party Roshe management Capabilities firmly is to the bab fabric of the business and the operations Institution that perform third party financial (se should benefit by Reducing the Risk and increasing agility and resiliency, ~ possibility of financial difficulthes are - lace of Cash flow → Increased Working Capital - high cost of Copikel : werth Peturn on Janeshment. Cs

Management Integring a management indegning is the tone at the hop", the attitude of maraganut howards Internal Controlls and the examples that their athinder set for employees who Sir lower is the corporate hierarely. A lack of management integrity presents a risk that a manager will miss appropriate Arsch or ganna financial Statement is persuit of a larger bones while making AAR all these points should be Cs Conskoameich.' CamScanner