How should set the Detection Risk

Reference no: EM132685503

Question - Cruz, Gomez & Co. is an audit and assurance firm which has recently accepted the audit of Corpuz & Perez Limited (CPL). During the planning of the audit, engagement manager has noted the following information regarding CPL:

CPL is a listed company operating in the mining sector.

CPL has a large network of subsidiaries, associates and foreign branches.

The company does not have an internal audit department and its audit committee does not include any members with a background in finance as suggested in the corporate governance guidelines

Cruz, Gomez & Co.'s policy is to keep the overall audit risk below 8%.

Required -

a. Discuss the necessary steps that Cruz, Gomez & Co. needs to take considering that Corpuz & Perez Limited is a first-time client.

b. Based on the information available to you during your Audit Planning, will you assess the Inherent Risk as Low or High? Why? How about Control Risk?

c. If Cruz, Gomez & Co. intends to keep the audit risk below 8%, how should they set the Detection Risk? Discuss the impact of their assessment to Substantive Procedures.

Reference no: EM132685503

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