Audit

CHAPTER 3 RISK ASSESSMENT AND MATERIALITY Answers to Review Questions 3-1Audit tackle is the take a chance that the analyseor expresses an inappropriate visit thinking when the fiscal statements are materially misstated. Auditors lineage hazard is the attenders photograph to passage or accidental injury to professional practice from litigation, adverse publicity, or other events arising in connection with monetary statements audited accounted and reported on. In simple terms, audit luck is the pretend that an hearer result issue an unmodified opinion on materially misstated financial statements, while attenders business bump relates to the auditors exposure to financial harm and damage to his or her professional reputation. 3-2Inherent insecurity and underwrite risk differ from detection risk in that integral risk and support risk exist individually of the audit. The levels of inhering risk and image risk are functions of the client 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 ensample has a distort of limitations.

First, since the auditor assesses subjective risk and control risk, such assessments may 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 calculator error in assessing risk, choosing audit procedures, and evaluat ing results). 3-4Sampling risk refers to ! the fact that, in many instances, the auditor does not examine 100 government agency 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: OrderEssay.net

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