Assessing Materiality and Risk Simulation
Assessing Materiality and Risk Simulation
Assessing Materiality and Risk Simulation
Why do certain accounts have to be audited 100%?
Because there is only four months to complete the audit the auditor cannot sample more than three accounts. Inventory, accounts payable, and property, plant, and equipment have numerous transactions so they would be very time consuming to audit 100%; therefore, the auditor should only sample these accounts. However, the auditor should audit accounts like cash, lines of credit, and intangibles 100% because they are relevant to the confectionery industry.
Why is materiality allocated only to those accounts that are sampled? The Financial Accounting Standards Board creates the standards for materiality. The portions that are supposed to be sampled are to provide evidence supporting the financial statements. Also the accounts that matter to the audit are going to be the only ones that are sampled; this is why materiality only applies to the accounts that are to be sampled. It is to provide the evidence for the financial statements.
Is any component of audit risk within the control of the auditor? Explain.
Detection risk can be controlled by the auditor by changing the timing, nature, and extensiveness of substantive tests performed on an assertion. The auditor can modify the audit according to their own discretion by deciding how high a detection risk they are willing to accept and decide how much testing to do.
How are the three risks that make up audit risk interrelated? This is the overdue risk for the auditing that the most auditors give an unsuitable appraisal on the financial statements. Auditing risk hast two types, whichever are the auditors would fail to discover concrete misstatements and the auditors would make concrete statements to keep under material misstatement. Audit risk has to act an inseparable element with detection risk and control. The material misstatement is
Assessing Materiality and Risk Simulation
Why do certain accounts have to be audited 100%?
Because there is only four months to complete the audit the auditor cannot sample more than three accounts. Inventory, accounts payable, and property, plant, and equipment have numerous transactions so they would be very time consuming to audit 100%; therefore, the auditor should only sample these accounts. However, the auditor should audit accounts like cash, lines of credit, and intangibles 100% because they are relevant to the confectionery industry.
Why is materiality allocated only to those accounts that are sampled? The Financial Accounting Standards Board creates the standards for materiality. The portions that are supposed to be sampled are to provide evidence supporting the financial statements. Also the accounts that matter to the audit are going to be the only ones that are sampled; this is why materiality only applies to the accounts that are to be sampled. It is to provide the evidence for the financial statements.
Is any component of audit risk within the control of the auditor? Explain.
Detection risk can be controlled by the auditor by changing the timing, nature, and extensiveness of substantive tests performed on an assertion. The auditor can modify the audit according to their own discretion by deciding how high a detection risk they are willing to accept and decide how much testing to do.
How are the three risks that make up audit risk interrelated? This is the overdue risk for the auditing that the most auditors give an unsuitable appraisal on the financial statements. Auditing risk hast two types, whichever are the auditors would fail to discover concrete misstatements and the auditors would make concrete statements to keep under material misstatement. Audit risk has to act an inseparable element with detection risk and control. The material misstatement is