Risk and Materiality-Handout

Auditing and Assurance Services

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Risk & Materiality Introduction – Learning  Objectives Understand the concept of audit risk Learn the form and components of the audit risk  model Understand the concept of materiality Identify steps in applying materiality in an audit
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Audit Process Audit Report
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Funda m e nta l C o nc e pts  - Ris k Audit risk = The risk that an auditor will give an inappropriate (wrong) opinion on financial statements. Financial statement level Individual account balance or class of transactions level
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Fundamental Concepts - Risk Engagement risk = Auditor’s exposure to loss or injury from litigation, adverse publicity, or other events arising in connection with auditing and reporting on financial statements. Client & 3 rd  party  lawsuits Negative publicity
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What is the audit risk model? Internal Controls Audit Procedures Financial Statements
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Control Risk Wha t is  the  a udit ris k m o de l? AR = IR x CR x DR Risk of Material Misstatement Detection Risk Inherent Risk
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Inhe re nt Ris k
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This document was uploaded on 03/04/2012.

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Risk and Materiality-Handout -...

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