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exam review of class 6

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Schneider, M

CLASS SIX SUMMARY CAS 200: Overall Objectives of the independent auditory and the conduct of an audit Audit Risk The sufficiency and appropriateness of audit evidence is a matter of professional judgement. Audit risk is a function of material misstatements & detection risk. Material misstatements occurs at two levels: o Financial statement level AND o Transactions, account balances, and disclosures these kinds of misstatements usually occur because of control risks or inherent risks. An example of inherent risk could be a complex calculation that is derived from estimates. Controls risks pertain to the companys internal control system. Detection risk is at the disposal of the auditor. Detection risk can only be reduced, not eliminated. Matters that assist the audit procedure in minimize detection risk include: o Adequate planning o Proper assignment of personnel o Professional scepticism o Supervision and review of all the work Audit risk can never be zero due to the inherent limitations of an audit which arise from: o Nature of financial reporting Accounts that require management decisions estimates
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