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Essay / Research Paper Abstract
This 6 page paper considers what is meant by audit risk and the types of audit risk that exist; inherent, control and detection. This is applied to a range of scenarios supplied by the student. The aspect of inherent risk and inventory is also discussed. The second part of the paper looks at how the debtors figure may be established as correct in an audit. The bibliography cites 4 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEauditrisk.rtf
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Unformatted sample text from the term paper:
the job, seeking to establish that the systems which produce the accounts are able to verify the correct amounts and tat they are used correctly. When looking at this it
is apparent how there is a subjective aspect to auditing as well as the objective procedures. One aspect that needs to be considered in the way an audit is designed
and carried out is that of audit risk. However, it also has to be remembered that the auditors job is to express an opinion, and as such an assurance is
not a certification of correct accounts, this is due to audit risk. However, a good knowledge and an effective audit can reduce audit risk. Audit risk means that the wrong
opinion is given, either an unqualified opinion being given when a qualified opinion should have been given or a qualified opinion when an unqualified opinion should have been awarded.
When looking at the different scenarios provided by the student there are three types of audit risk; inherent risk, control risk and detection risk (ACCA, 1999). If we put line
the risk types these can then be applied to the different scenarios. The first of these is inherent risk. Inherent risk is the risk that certain transaction types or
an account balance may be misstated, either due to individual transactions or as the result of an aggregate impact with misstatements from other areas, this may be irrespective of the
internal controls (ACCA, 1999). Control risk is also a risk of misstatement, this may be seen in a particular type or class of transaction, it may be material,
especially when results are aggregated, and are misstatements that would not be prevented or detected and subsequently corrected with the internal control systems in a reasonable time (Dusenbury et
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