COMM 455 Lecture Notes - Lecture 6: Audit Risk, Internal Control, Going Concern
Document Summary
Audit risk must be reduced to an acceptably low level. Cas 550 related party terms transaction (risk higher than independent) Audit risk (ar) = inherent risk (ir) * control risk (cr) * detection risk (dr) Risk that an auditor would issue an unmodified opinion if in fact, there is a misstatement. If audit risk higher than other risk, would only accept audit when no one is relying on report. Inherent risk + control risk = risk of a material misstatement (rmm) Contain a material risk within; before i think about how good their controls are. Internal control will fail to detect material misstatement. Can"t change internal control in short term, can affect it in the l/t. Risky business, terrible internal control (high) risk of material. Can see things before the client does. Need to understand the people you work with. Volkswagen how did it happen, how did executives let it happen. Ubc people don"t just leave top positions.
