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ShatanaBentley-AC410-Auditing-Unit5-Assignment - Following...

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Following the scientific method in this example, what steps would you as an auditor take to assure you have minimized the potential for audit risk (making a positive evaluation of the firm's financial status when it is in fact negative)? Question: Are the any of the financial statements materially misstated? Background: Review the inherent and control risks of the business to get an in-depth understanding of the business. Assess the level of inherent and control risk and use this to determine the detection risk needed to get an overall audit risk at acceptable level. Plan audit steps to attain the detection risk resulting from preliminary assessment of inherent and control risk. Hypothesis: The financial statements are free of any material misstatements. Hypothesis Test: Conduct tests of controls and tests of transactions and balances to try to disapprove the hypothesis. Concentrate in areas that pose greatest risk (more tests might be needed in some areas than others) based on preliminary assessment of risk areas. If new
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