1. Identify the functions of audit risk?
1. Identify the functions of audit risk?
Homework Answers
The functions of audit risk are two fold i.e. the risk of material misstatement and detection risk. Risk of material misstatement is the are materially misstated before the audit has commenced. The financial statements are said to be materially misstated if they are not prepared fairly in accordance with the applicable financial reporting framework.Detection risk is the risk that the material misstatement will not be detected during audit. Detection risk can arise due to ineffective audit procedures and if the procedures are not performed with due professional care.
1. What is audit risk? 2. What is audit risk model? 3. What are the components...
1. What is audit risk? 2. What is audit risk model? 3. What are the components of audit risk and how do these relate to each other? 4. How does materiality and audit approach interact with the audit risk mode?
Using the audit risk model, state the effect on control risk, inherent risk, acceptable audit risk,...
Using the audit risk model, state the effect on control risk, inherent risk, acceptable audit risk, and planned evidence for each of the following independent events. In each of the events cirlce one letter for each of the three independent variables and planned evidence: I=increase, D=decrease, N= no effect, and C= cannot determine from the information provided. A. The client's management materially decreased long-term contractual debt: Control risk IDNC Acceptable audit risk IDNC Inherent risk IDNC Planned evidence IDNC B....
Requirement a. Identify the phase of the audit in which each activity occurs. Phase of Audit...
Requirement a. Identify the phase of the audit in which each activity occurs. Phase of Audit Set acceptable audit risk and decide preliminary judgment about materiality 1. and performance materiality Understand internal control and assess 2. control risk. I. Plan and Design an Audit Approach Perform substantive analytical 3. procedures for accounts payable. II. Perform Tests of Controls and Substantive Tests of Transactions JII. Perform Substantive Analytical Procedures and Tests of Details of Balances 4. Confirm accounts payable. IV. Complete...
Identify the Significance of audit objectives? And Identify the Integration of audit objectives?
Identify the Significance of audit objectives? And Identify the Integration of audit objectives?
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk...
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk...
7. Explain the Audit risk, its function, components, its importance and departmental responsibility of audit risk?
7. Explain the Audit risk, its function, components, its importance and departmental responsibility of audit risk?
Question 2 FACTORS AFFECTING ACCEPTABLE AUDIT RISK (5 marks) The Audit Risk Model is the method...
Question 2 FACTORS AFFECTING ACCEPTABLE AUDIT RISK (5 marks) The Audit Risk Model is the method by which an auditor determines his exposure to an audit assignment and the consequences of an audit failure. Required: Determine the impact of an audit failure from the perspective of: a) The degree to which users rely on statements 11.5 marks) b) The likelihood that an auditee will have financial difficulties after the audit report issued (1.5 marks) The integrity of management (2.0 marks)...
Discussion Topic: When performing an audit, auditors are especially concerned about engagement risk. For this reason,...
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...
1) Identify audit tests that may be used as alternative audit procedures when a response is not r...
1) Identify audit tests that may be used as alternative audit procedures when a response is not received for a positive confirmation request. Compare and contrast the quality of audit evidence yielded by these procedures with that produced by audit confirmation procedures. 2) Is it appropriate for audit firms to sharply discount their professional fees for development stage companies? Why or why not? What problems, if any, may this practice pose for audit firms? 3) Should audit firms accept “ethically...
13 Following are three situations that involve the audit risk model as it is used for...
13 Following are three situations that involve the audit risk model as it is used for planning audit evidence requirements in the audit of inventory. 1 Acceptable audit risk Inherent risk Control risk Planned detection risk Planned evidence High Low Low Situation 2 Low High High 3 Medium Medium Medium Required. Fill in the blanks for planned detection risk and planned evidence using the terms low, medium, or high. Then, using your knowledge of the relationships among the foregoing factors,...
Requirement a. Identify the phase of the audit in which each activity occurs. Phase of Audit Set acceptable audit risk and decide preliminary judgment about materiality 1. and performance materiality Understand internal control and assess 2. control risk. I. Plan and Design an Audit Approach Perform substantive analytical 3. procedures for accounts payable. II. Perform Tests of Controls and Substantive Tests of Transactions JII. Perform Substantive Analytical Procedures and Tests of Details of Balances 4. Confirm accounts payable. IV. Complete...
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk...
Question 2 FACTORS AFFECTING ACCEPTABLE AUDIT RISK (5 marks) The Audit Risk Model is the method by which an auditor determines his exposure to an audit assignment and the consequences of an audit failure. Required: Determine the impact of an audit failure from the perspective of: a) The degree to which users rely on statements 11.5 marks) b) The likelihood that an auditee will have financial difficulties after the audit report issued (1.5 marks) The integrity of management (2.0 marks)...
13 Following are three situations that involve the audit risk model as it is used for planning audit evidence requirements in the audit of inventory. 1 Acceptable audit risk Inherent risk Control risk Planned detection risk Planned evidence High Low Low Situation 2 Low High High 3 Medium Medium Medium Required. Fill in the blanks for planned detection risk and planned evidence using the terms low, medium, or high. Then, using your knowledge of the relationships among the foregoing factors,...
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