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Flashcards in Risk 2 Deck (6)
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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
  1. AR= Set by auditor at start
  2. IR/CR = dependant on company/industry
  3. 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.