Audit Planning & Supervision Flashcards
If Performance Materiality is high and the RMM is low, then
Nature, timing and extent can be low
If performance materiality is low and the RMM is high, then
Nature, timing and extent must be high
What is Audit Risk?
Its the risk that the auditor will issue an Unqualified Opinion on the FS when the FS contains Material misstatement
What is an Inherent Risk?
Its the risk of a misstatement due to factors inherent to specific account balances or audit areas
What is control risk?
Its the risk that controls fail to operate as desire
What is Detection Risk?
its the risk that the audit procedures will fail to detect a material misstatement that exists in the FS
What constitute the Risk of Material Misstatement?
Inherent risk and control risk
If the RMM is high, then Detection risk is
low
What would be the risk response by the auditor is RMM is high
Auditor will increase the nature, extent and timing of audit procedures
What is the audit risk model?
RMM X Detection risk
RMM is
Inherent risk X Control risk
If the RMM is low, the detection risk can be assessed
high
What would be the auditor response when assessing RMM low
The nature, extent and timing of the audit will be decreases
What are the fraud risk factors?
Incentives/pressure
Opportunities
Rationalization
