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Auditing

The document discusses audit risk assessment procedures including inquiries, analytical procedures, and observation and inspection. It also covers inherent risk, control risk, and detection risk and how they impact substantive testing. Finally, it stresses the importance of following proper audit procedures to effectively plan and perform an audit.

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9 views

Auditing

The document discusses audit risk assessment procedures including inquiries, analytical procedures, and observation and inspection. It also covers inherent risk, control risk, and detection risk and how they impact substantive testing. Finally, it stresses the importance of following proper audit procedures to effectively plan and perform an audit.

Uploaded by

camscams
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Audit risk assessment is the procedures performed by the auditor to obtain an understanding of the

entity and its environment including its internal control and to assess the risks of material misstatement
in the Financial Statement. Audit risk is fundamental to audit process since the auditors cannot or do not
seek to review all the transactions without it. Auditor have used this approach in order to minimize the
chance of giving an inappropriate audit opinion, to make sure the audit work is carried out efficiently
and effectively. Audit risk assessment procedures includes Inquiries of management and others within
the entity, is that you are obtaining their views about the risks of fraud and ask them on how to be
addressed. the auditor should use professional judgment in deciding when it is necessary to corroborate
responses to inquiries with other information. Next is Analytical Procedures is performed during the
planning that may be helpful in identifying the risk of material misstatement due to fraud. In performing
analytical procedures in planning the audit, the auditor creates expectations regarding plausible
relationship that are reasonably expected to exist. When those expectations are compared to recorded
amounts or ratios calculated from recorded amounts, the auditor should take those results into account
when determining the risk. Last is, observation and inspection on how to work their control on their
environment and performed and inspection if there are segregation of duties.

Inherent risk is a natural or already exist in the financial statement or the material misstatement occur
prior to the consideration of internal controls due to complexity of accounting treatments, numbers of
treatment and so on. When the inherent risk increases the auditor should make more effective
substantive procedure. Control Risk is the risk that a material misstatement due to error or fraud will not
be prevented, detected on a timely basis by the company’s internal control. Detection risk, the auditor
may not be able to detect the misstatements despite performing audit procedures. There are Three
main issues that the consider need to consider, first is Level of assurance, when the level of assurance
goes up or higher the substantive testing will also increase. Next is when Level of susceptibility of the
account for misstatement increases the substantive testing will also increases. Last in when the
Effectivity of internal control increases the substantive testing will decrease.

Audit planning is not just easy as what you think, there are many procedures that needed to do. As a
student of Bachelor of Science in Accountancy, when doing an audit planning you must not need to trust
easily you must need to investigate, observe, inspect or gain many information that may be sufficient to
make an effective audit. Even though you have 20 years of experience on doing auditing you must need
to take it seriously, observe, inspect and investigate it clearly. Not all the time the outline or our plans
on doing the auditing will go smoothly. Sometimes, we always need to change our plans on every audit
we do. We always need to follow the standards or the procedure in making an audit. Our guts will not
tell us if there is a fraud or error in the financial statements but if we do the procedure rightly, we may
know if there is a fraud or error in the financial statement, it is for the sake of the 100% audit or an
effective audit. As an auditor we need to act an independent, it will help us to be a great auditor also it
will help us to provide a 100 % or effective audit.

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