Risk Summary and Auditor's Opinion Flashcards
Risks that relate to ROMM
Inherent risk
Control risk
What is meant by a detection risk?
Risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will fail to detect a misstatement which exists that could be material
Left column for ROMM?
Which FS items are overstated/understated => why client’s treatment is wrong => there is a risk that
Left column for MM?
New audit client, time pressure, lack of resources, competence
Right column?
Response must relate to auditor and represent auditor’s reaction
What is meant by inherent risk?
A class of transaction, account balance or disclosure to a misstatement that could be material
What is meant by control risk?
Control risk is the risk that the entity’s system of internal control will not prevent or detect and correct a misstatement on a timely basis
Wbat is test of control>
Evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level
What is substantive procedure?
Tests of details (of classes of transactions, account balances and disclosures) and substantive analytical procedures.
What is meant by KAM?
Matters where auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period
When is an auditor prohibited from using an Emphasis of Matter paragraph?
When KAM is used
What is needed to understand audit risk?
A strong knowledge of relevant accounting standards
Shoudl ratio calculations be included in audit risk answers?
Yes
How to explain an audit risk?
State the specific area of the financial statements impacted with an assertion
What should an auditor’s response summarise?
What they are recommending will help the auditor to form a conclusion on the identified audit risk
