RSM323H1 Chapter Notes -Audit Risk, Control Risks, Internal Audit
Document Summary
Chapter 7 - assessing risks and internal control. Chapter overview: audit risk assessment, business risk-based approach to auditing, accounting processes and the financial statements, business risk and risk of material misstatement, understanding internal control, how internal control relates to the risk of material misstatement. Audit risk assessment: auditing is fundamentally a risk management process. Audit risk is related to information risk that financial statements are materially misstated. Auditors strive to lower audit risk by performing audit work that gives a high level of assurance that statements are correct. Auditors need to assess risk in audit related terms; inherent risk, control risk and. Inherent risk detection risk: the probability of material misstatement occurring in transactions entering the accounting system or being in the account balances is inherent risk. Auditors do not create or control inherent risk. Auditors only try to assess its magnitude based on prior experience, management bias, and nature of the transactions.
