Risk 2 Flashcards
Risk Assessment Audit risk model
1
Q
what is an audit risk
A
unmodified opinion when the f.s. are materially misstated.
-auditor expresses inappropriate opinion on materialty.
2
Q
AR= IR X CR X DR
different phases
A
- AR= Set by auditor at start
- IR/CR = dependant on company/industry
- DT= adjusted by auditor to balance figures
3
Q
A risk of material misstatement comes from inherent risk and control risks explain further
A
- fraud or errors throughout the year prior to audit
- examples of risks of material misstatement:
going concern/ liquidity - expansion
complex regulations - volatile markets
inconsistency with i.t. - economical stability.
4
Q
Inherent risk
A
a SUSPECTABILITY of an ASSERTION to a MISSTATEMENT that could be MATERIAL.
assuming no related internal controls
5
Q
Control Risk
A
risk a misstatement that could be material will not be prevented, detected or corrected
example : design of internal control
6
Q
Detection Risk
A
risk that auditors procedures will not detect the misstatements that could be material
example: experience of auditor, time constraints and poor planning.
