QUESTIONS
Chapter 8 introduced the eight parts of the planning phase of an audit. Which parts involve the evaluation of risk?
Why is it important for the auditor to consider the risk of material misstatement at the overall financial statement level?
Provide two examples of factors that might increase the risk of material misstatement at the overall financial statement level.
Assume that you are concerned that your client has recorded revenues that did not occur. What audit objective would you assess as having a high risk of material misstatement?
Describe the types of procedures auditors perform as part of their risk assessment procedures.
In addition to inquiring of individuals among management who are involved in financial reporting positions, such as the CFO and controller, which additional individuals should you consider making inquiries of as part of your risk assessment procedures? Be sure to describe how those individuals might be helpful to you in assessing risks of material misstatement.
Auditing standards require that the engagement team members engage in discussion about the risk of material misstatement. Describe the nature of this required discussion and who should be involved.
Auditing standards require that the engagement team members engage in discussion about the susceptibility of the financial statements to the risk of fraud.
How does this discussion relate to the required discussion about the risk of material misstatement?
- Define the audit risk model and explain each term in the model.
2. Explain the causes of an increased or decreased planned detection risk.
