Audit

CHAPTER 3 RISK ASSESSMENT AND MATERIALITY Answers to Review Questions 3-1Audit essay is the take a chance that the analyseor expresses an inappropriate visit picture when the fiscal statements are materially misstated. Auditors trade hazard is the attenders moving-picture show to passage or accidental injury to professional practice from litigation, adverse publicity, or other events arising in connection with pecuniary statements analyseed and reported on. In simple terms, audit luck is the take a chance that an hearer im assort issue an unmodified opinion on materially misstated financial statements, while auditors business riskinessiness relates to the auditors exposure to financial mischief and damage to his or her professional reputation. 3-2Inherent risk and underwrite risk differ from detection risk in that integral risk and support risk exist one by one of the audit. The levels of inhering risk and obtain risk are functions of the c lient and its environment, and the auditor has little control over these risks. The auditor can control detection risk through the scope (nature, timing and extent) of the audit procedures performed. Thus, detection risk has an inverse relationship with subjective risk and control risk. 3-3The audit risk feign has a unloosen of limitations.

First, since the auditor assesses infixed risk and control risk, such assessments whitethorn be higher or lower than the actual inherent risk and control risk that exist for the client. Second, the audit risk model does not consider the possibility of non-sampling risk (auditor estimator error in assessing risk, choosing audit pro! cedures, and evaluating results). 3-4Sampling risk refers to the fact that, in many instances, the auditor does not examine 100 part of the account balance or class of transactions. Since only a subset of the population is examined, it is possible that the sample drawn is not model of the population and a wrong conclusion may be made on the fairness of the account balance. Non-sampling risk occurs...If you loss to get a full essay, order it on our website: BestEssayCheap.com

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