BU477 Chapter Notes - Chapter 6: Substance Abuse, Deferral, Gross Margin
Document Summary
Chapter 6: client acceptance and planning the audit: Three reasons why auditors need to audit planning: Enable the auditor to obtain sufficient audit evidence. Important if pa wants to minimize legal liability and maintain good reputation. Help keep audit costs reasonable: helps firm stay competitive and retain clients. Avoid misunderstandings with client: to maintain a good relation and facilitate quality work. There are two risk terms: acceptable audit risk, risk of material misstatement. Acceptable audit risk: how willing the auditor is to accept that financial statements may be materially misstated after audit is complete and an unqualified opinion was given. Risk that after audit is complete the wrong issue was given. Lower the risk the more certain the auditor will be. Risk of material misstatement: risk that the fs are misstated prior to audit, two types of components and its inherent and control. Chance of misstatement before considering effectiveness of controls: control:
