CACC521-Week05-text

CACC521-Week05-text - CACC5210Week05 Materiality...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
CACC5210-Week05 18/10/2010 16:00:00 Materiality Finding misstatements question Group project – parts 2-7 for next week. Chapter 7 Audit Risk Model nature, timing and extent of audit planning LO-5 – know 5 components CAS 315 Audit Risk % of audit opinion being wrong lower for public companies inherent risk o possibility of error existence related party transactions art valuation, etc. o higher inherent risk -> lower detection risk o higher inherent risk
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
more procedures, more reliable, more samples, more evidence DR=AR/RMM -> IR*CR DR – detection risk, AR-Audit Risk, RMM – risk material misstatement control Risk o auditor has no control o higher causes lower detection risk helps to decide substantive audit procedures nature timing and extent of substantive audit procedures bank statements, ar, ap, etc. o detection risk can never be 0 -  Business Risk audit client will fail to meet objectives risk audit firm will be sued because client doesn’t meet business objectives higher business risk will cause lower audit risk (do more work to lower audit  risk) Inherent Risk Company chance of having MM Control Risk Test controls to lower chance of MM Control Framework
Background image of page 2
o CICA – COCO substantive testing o checking dollar values compliance testing o deviation condition can’t rely on control  test controls in Casino since don’t know how they record revenue internal controls must be tested every 3 years handbook requires testing every year if relied upon significant risk areas of higher risk o related party, unusual transactions RMM DR – detection risk risk that auditors substantive procedures will fail to detect a material  misstatement Substantive tests include audit of details of transactions and balances, and analytical  procedures applied to dollar amounts in the accounts.  Audit Risk higher audit risk, less assurance, higher chance of being sued Lower AR – higher assurance Public company should be higher assurance Private company might have higher audit risk and lower assurance
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
AR = IR x CR x DR Audit risk will occur when: –a material misstatement has been made in the transactions or balances  (inherent risk), –and internal controls fail to detect or correct the misstatement (control risk),  and  –audit procedures also fail to detect the  misstatement (detection risk). o
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/14/2011 for the course ACC 521 taught by Professor G.caers during the Spring '11 term at Ryerson.

Page1 / 20

CACC521-Week05-text - CACC5210Week05 Materiality...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online