BU477 Chapter Notes - Chapter 6: Internal Control, Human Capital, Audit Evidence
Document Summary
Chapter 6: client acceptance and planning the audit. Acceptable audit risk: measure of how willing the auditor is to accept that the f/s may be materially misstated after the audit is completed and an unqualified opinion has been issued. Lower acceptable audit risk = auditor wants to be more certain that f/s are not materially misstated. Zero risk = certainty, 100% risk = complete uncertainty. Risk of material misstatement: risk that the f/s are materially misstated prior to audit. Inherent risk: measure of auditor"s assessment of the likelihood of material misstatement in an account balance before considering the effectiveness of controls. Control risk: risk that material misstatement will not be prevented, or detected and corrected, on a timely basis. Auditor must develop audit plan that includes following components: Nature, timing, and extent of audit procedures for the purpose of risk assessment. Nature, timing, and extent of additional audit procedures, linked to the individual audit assertions.
