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AUDITING SP 2008 CH 9 OUTLINE

Auditing and Assurance Services (12th Edition)

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Chapter 9 Materiality & Risk Table 9-1 Page 249 Also the relationship between materiality & evidence Materiality regarding fraud - loan agreements - trends Tolerable misstatement – the misstatement we will accept Known Misstatements – can determine the amount & error Likely Misstatements – Diff btwn auditor & mgt estimates (A/D/A) - Projected misstatements based on known errors in a sample See bottom of page 255 and top of 256 for calculation of est total misstatement Table 9-2 Risk terminology and relationship to overall risk (planned detection risk)
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Unformatted text preview: Planned Detection Risk – the risk that audit evidence of a segment will fail to detect misstatements exceeding tolerable misstatement. The lower the PDR the MORE evidence the auditor must gather. Acceptable Audit Risk (Level of Assurance) – how willing the auditor is to accept that the financial statements may be materially misstated and an unqualified opinion is issued. Zero risk is certainty 100 percent is complete uncertainty. See table 9-3 on PG 263 for Methods used to assess AAR....
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