Planning and Risk Flashcards
Buisness risk
~ risk inherent to co in its operations
~ 3 categories: financial, operational and compliance risks
~ ISA 315
Financial risk
arising from financial activities or financial consequences of operation e.g. cash flow issues
Operational risks
arising from operation reasons e.g. major supplier lost
Compliance risk
arises from non-compliance with laws and regs surrounding biz
Audit risk
that auditor expresses inappropriate audit opinion when FS materially misstated
~ ISA 200
Inherent risk
susceptibility of an assertion to misstatement that could be material (assuming no IC)
Control risk
material misstatement could occur and will not be prevented, detected or corrected on a timely basis by IC
Detection risk
auditors procedures will not detect a material misstatement (individual or aggregated)
Materiality: High risk client
Revenue: 0.5%
Assets: 1%
PBT: 5%
Materiality: Low risk client
Revenue: 1%
Assets: 2%
PBT: 10%
Data analytics (totally BRAVE)
Totally - able to test 100% B - Breakdown R - Reperform A - Aged analysis V - Variance analysis E - Exception report
Return on capital employed (ROCE)
~ profitability
Profit b4 interest and tax/(SC + reserves + NC liab)
Operating profit margin
~ profitability
PBIT / revenue
Asset turnover
~ profitability
revenue/(SC + reserves + NC Liab)
Gross margin
~ profitability
gross profit / revenue
