Audit risk is an risk that an auditor gives an in appropriate opinion on audit engagement. This is usually means giving an clean/unqualified opinion when the facts are materially misstated.
In case the auditor is aware that the potential client has had high exposure to inherent risk And when he knows current resources are not capable to handle the client the auditor should not accept the engagement this avoids inherent risk
Insufficient time to the audit team may also be the other factor for inherent risk
The risk can also be affected by external environment for example climate change political problem
Identify three factors that might cause the auditors to assess the inherent risk of an engagement...
Identify three factors that might cause the auditors to assess the inherent risk of an engagement at a higher level.
Auditors begin their assessments of inherent risk during audit planning. Which of the following would not help in assessing inherent risk during the planning phase? A) obtaining knowledge about the client’s business and industry B) identifying related parties C) touring the client’s plant and offices D) obtaining client’s agreement on the engagement on the engagement letter
(a) Provide some examples of the types and sources of information auditors use to assess inherent risk. (b) Describe the major components for the control environment and how feature of each can contribute to a stronger control environment.
Discussion Topic: When performing an audit, auditors are especially concerned about engagement risk. For this reason, they perform main activities to reduce engagement risks. Further, the auditing standards require auditors to understand the client's business, and its environments, and its internal controls when planning the audit so that they could better plan the nature, timing, and extent of the audit. Required: 1. Discuss why the auditor would be concerned about engagement risk and identify two or more activities the auditors...
Which of the following is an accurate statement regarding inherent risk? A) Inherent risk has no impact on the amount of evidence gathered. B) Auditors are generally conservative in setting inherent risk. C) The profession has established guidelines for setting inherent risk. D) Factors impacting inherent risk will affect all cycles, balances, and disclosures.
Elaborate on the following Chapter 4 points: 1: Define engagement risk 2: Define the achieved level of audit risk 3: Understand the risk when the client is focused on its PE ratio 4: Define detection risk 5: Understand the risk of material misstatement as compared to detection risk 6: Identify inherent risk factors pervasive in the client’s financial statements 7: Understand the relationship between the risk of material misstatement and substantive tests
Chapter 7:Internal Control Question1: Because of the Inherent inconsistency of automated controls, auditors will test them at various times in the year to determine their operating effectiveness. True False Question2: A correct response by management to an assessment of risk could include taking no action because the risk is consistent with the risk tolerance of the organization. True False Question3: A primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with Knowledge...
A) Auditors often must request information from the client while completing various audit tasks. What are some of the issues that the auditors may encounter when requesting evidence from clients and how should they deal with those issues? B) What is the difference between inherent risk and control risk? Why is it important that auditors not assume that a certain level of control risk exists when assessing inherent risk? C) What were some of the risk factors that may impact...
If auditors assess control risk at the maximum level, they will tend to: Multiple Choice perform more audit procedures using internal evidence. perform substantive tests at an interim date. perform a great deal of additional tests of controls. perform a great deal of substantive testing during the audit.
discuss the role of the audit planning process, including how auditors assess risk. Do not disclose the name of the organization. .