ASSIGNMENT
Why is it important to distinguish the auditor’s assessment of the risk of material misstatement due to fraud from the assessment of the risk of material misstatement due to error?
How should the auditor consider risks related to revenue recognition when assessing the risk of material misstatement due to fraud?
What types of inquiries should the auditor make when considering the risk of material misstatement due to fraud?
What constitutes a significant risk?
Describe examples of characteristics of transactions and balances that might cause an auditor to determine that a risk of material misstatement is a significant risk.
Describe which two factors of the audit risk model relate to the risk of material misstatement at the assertion level.
Explain the causes of an increased or decreased planned detection risk.
Define what is meant by inherent risk. Identify four factors that are associated with higher inherent risk in audits.
Explain why inherent risk is set for audit objectives for segments (classes of transactions, balances, and related disclosures) rather than for the overall audit.
What is the effect on the amount of evidence the auditor must accumulate when inherent risk is increased from medium to high for an audit objective?
Explain the effect of extensive misstatements found in the prior year’s audit on inherent risk, planned detection risk, and planned audit evidence.
Explain what is meant by the term acceptable audit risk. What is its relevance to evidence accumulation?
Explain the relationship between acceptable audit risk and the legal liability of auditors.
Explain why there is an inverse relationship between planned detection risk and the amount of evidence an auditor collects for a specific audit objective.
Auditors have not been successful in measuring the components of the audit risk model. How is it possible to use the model in a meaningful way without a precise way of measuring the risk?
Explain the circumstances when the auditor should revise the components of the audit risk model and the effect of the revisions on planned detection risk and planned evidence.
Explain how audit risk and materiality are related and why they need to be considered together in planning an audit
