Chapter 4 SB HW Flashcards
What is the risk that a material account or disclosure assertion will not be prevented, detected, or corrected on a timely basis by the entity’s internal control?
Control risk
The susceptibility of an assertion in an account or disclosure to a misstatement due to error or fraud that could be material is known as ______ risk.
inherent
The risk of material misstatement is also referred to as ______ risk because it stems from decisions made by the entity.
client
What are the 3 steps involved in audit risk model at assertion level?
- Set planned level of audit risk
- Assess risk of material misstatement
- Determine appropriate lvl of detection risk
Evaluations of financial information made through the study of plausible relationships among both financial and nonfinancial data are referred to as _______.
analytical procedures
The risk of material misstatement refers to misstatements caused by _____ or ____.
error, fraud
Who addresses business risks by implementing a risk assessment process?
Management
The audit team is required to hold discussions, referred to as ____________.
brainstorming sessions
In order to respond to pervasive risks, auditors may ______(3 parts).
- Incorporate unpredictability
- Assign more experienced staff
- Evaluate if application of acctg policies by entity may create material misstatement
When auditing a public company, the auditor is generally responsible to disclose fraud to the ______.
audit committee and senior management
Threats from significant events that could adversely affect an entity’s ability to achieve its objectives and execute its strategies are ______.
business risks
Risk of material misstatement is a combination of ___________.
inherent risk and control risk
Audit risk formula
IR x CR x DR
Auditors assess the risk of material misstatement at the ______ level.
assertion
