What is audit risk and what are the components of audit risk

Assignment Help Auditing

Reference no: EM132368734

Topic - Risk Assessment

On completing the learning activities associated with this topic you should be able to

1. Evaluate audit risk.

2. Outline the concept of materiality.

3. Discuss how an auditor determines their audit strategy.

4. Interpret how client measure performance.

5. Specify how an auditor uses analytical procedures when assessing risk.

Reading guide - References: Moroney, Campbell and Hamilton, Chapter 4

Standards:

ASA 300: Planning an Audit of a Financial Report

ASA 315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment

ASA 320: Materiality in Planning and Performing an Audit

ASA 520: Analytical procedures

Review questions:

1. What is audit risk? What are the components of audit risk?

2. What is a time-series analysis? How could it be useful to an auditor?

3. Explain how setting a lower materiality level affects the number of items that are material and the assessment of the sufficiency and appropriateness of audit evidence.

4. How does the auditor's preliminary assessment of materiality affect audit planning? What does an auditor consider when making the preliminary assessment of materiality?

5. If an auditor adopts a lower assessed level of control risk approach, do they have to perform any substantive procedures? Explain.

6. Define business risk and describe several sources of client business risk. What is the auditor's Primary concern when evaluating client bus?

Reference no: EM132368734

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