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Audit Risk Script

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MisshtaC
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11 views

Audit Risk Script

Uploaded by

MisshtaC
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The other procedure we’ve done for risk assessment is considering or the

computation of the audit risk. Based on our professional judgment and


after assessing the risk of material misstatements through understanding
the entity and its environment, we’ve arrived at an audit risk of 3%. This
means that this 3% is the largest possibility, level or chance that we
auditors will issue an unqualified opinion when the financial statements
were materially misstated. And for us to come up with an audit risk of 3%,
we used the audit risk model which shows that audit risk is equal to
inherent risk X control risk X detection risk. We derived the inherent risk of
90% from our assessment of inherent risk at assertion level. And a control
risk of 85% from assessing the entity’s internal control. These percentages
were based on our professional judgement. And with this formula, we will
have a detection risk of 3.92%. Considering the low level detection risk, and
high risk of material misstatements, , it means that we have to extend the
scope of our course of action. Indicating that we need to perform more
audit procedures.

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