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Flashcards in 14 - Planning Assessing Risk Deck (7)
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1

What is included in the audit strategy memorandum?

Background
Systems
Staffing
Materiality
Analytical procedures
Risk assessment
Timetable

2

What is audit risk?

Inherent risk x control risk x detection risk

3

In what cases would inherent risk be higher?

Significant development occurred
Accounting is complex
Non routine transaction
Judgements required, e.g estimates

4

What are the financial statement level risks?

Fraud
Going concern
Weak control environment

5

What are the two different types of fraud?

Fraudulent financial reporting
Missappropriation of assets

6

Fraud risk factors?

Incentive or pressure to commit fraud

Perceived opportunity to commit fraud

Ability to rationalise the fraudulent action

7

Benchmarks for materiality?

PBT - profit orientated entity consistently showing profit

Op ex - public sector entity providing services based on budget

Revenue - fluctuations in PBT but still profit orientated entity / not for profit but has minimal profits or is loss making

Total assets - property management company with value services