Management and Organizational Studies 3363A/B Chapter Notes - Chapter 7: Preliminary Ruling, Audit Risk, Internal Control

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3363A/B
• Professor: Michelle Loveland

Document Summary

Materiality and risk: usually done in the planning phase, risks arise when a situation includes assessing probabilities (what is the likelihood of an event occurring) Risks in auditing: there is always some level of uncertainty when preforming an audit, the audit risk model is used as part of a strategic auditing approach. Inherent risk and control risk are measured by the auditor but not controllable: determine audit risk, inherent risk and control risk, and then solve for planned detection risk, detection risk is the only one you have control over. It determines how much evidence you have to collect: the lower the audit risk, the more evidence you have to collect. If there is no reliance on internal controls, the control risk is 100% Audit assurance: the compliment of audit risk. If audit risk is 2%, then audit assurance is 98: you can never have 100% audit assurance (because you can never have 0% audit risk)