Bachelor of commerce (Accounting) ACC 321 (Auditing and professional practice) 12 power point slides Big Ideas - assertions -materiality - the audit risk model - sufficient, appropriate evidence...

PowerPoint Presentation
Topic
How Audit Risk Model interacts with the other three listed concepts which are Assertions, Materiality and Sufficient & Appropriate Evidence.
Introduction:
As per O. R. Whittington, K. Pany (2012), Audit can be defined as the process undertaken by the auditor to examine and report whether the financial statement of an client to ensure whether the financial statements are giving true and fair view, prepared as per applicable financial reporting framework.
Audit Risk is the risk that the Auditor will give incorrect opinion when the Financial Statements are Materially Misstated.
Body:
There are 3 components to Audit Risk Model:
Inherent Risk: As per P. Griffiths (2012), Inherent
risk the risk that errors or omissions are present in
the financial statements due to factors other
than failure of Internal Controls.
Examples:
Accounts Likely to require Adjustments.
Judgement involved in determining account balances.
Complexity of Underlying Transactions.
Control Risk:
As per K. M. Johnstone, A. A. Gramling, L. E. Rittenberg (2014), Control Risk can be defined as the risk that the financial statements are materially misstated due to failure of Internal Controls. However due to Inherent Limitations of Audit, This risk can only be reduced and not eliminated.
Detection Risk:
Detection risk is the risk that auditors’ substantive procedures will lead auditor to conclude no material misstatement exists when, in fact, one does.
During the planning phase of the audit, a planned acceptable level of detection risk is determined for each significant assertion.
Therefore, audit risk is a combination of inherent risk, control risk and detection risk.
Audit Assertions in Audit Risk Model:
Auditor uses assertions to assess risks by
considering different potential misstatements
that may occur and Design audit procedure
to address these risks. Auditor needs to
obtain evidence that supports each
assertions for every material component of
the financial report.
Methods to obtain Audit Evidences...