BU547 Lecture Notes - Lecture 3: Audit Evidence, Financial Statement, Financial Audit
Document Summary
This is approximately the rate the bank could earn by investing in canada treasury bills for the same length of time as the business loan. This risk reflects the possibility that the business will not be able to repay its loan. This risk reflects the possibility that the information upon which the business decision was made was inaccurate: auditing has no effect on either the risk-free interest rate or business risk. It can have a significant effect on information risk. A small company may find it less expensive to pay higher interest costs than to increase the costs of reducing information risk (e. g. , by having an audit). For larger businesses, it is usually practical to incur such costs to reduce information risk. What are the three main ways to do so: the user may go to the business premises to examine records and obtain information about the reliability of the statements, management is responsible for providing reliable information to users.
