Assessing Materiality and Risk Simulation - Team B

Assessing Materiality and Risk Simulation - Team B -...

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Assessing Materiality 1 Assessing Materiality and Risk Simulation Randy Johnson, Lemardre Miller, Richard Pfister, David Trejo ACC 490 March 27, 2011 Ann Reynolds
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Assessing Materiality 2 Assessing Materiality and Risk Simulation The Assessing Materiality and Risk Simulation shows the importance of an auditor taking the appropriate steps with respect to risks associated with an audit. The simulation shows that there are some accounts that should be audited 100%, why materiality is allocated only to those accounts that are sampled, what component risk is within the control of the auditor, what the three risks are and how are they inter-related. Why Some Accounts Should Be Audited 100% Accounts that have a higher probability of assertion incorrectness by a company’s management are accounts that should be audited 100%. For example, from the simulation, accounts that correlate to cash like Lines of Credit, Cash, and Intangibles are deemed to be quite important and should be audited 100%. Audits have limitations and constraints (resources like personnel and timeframe),
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This note was uploaded on 04/07/2011 for the course ACCT 490 taught by Professor Richard during the Spring '11 term at DeVry Long Beach.

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Assessing Materiality and Risk Simulation - Team B -...

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