COMM 455 Lecture Notes - Lecture 11: Audit Risk, Dont, Simple Random Sample
Document Summary
Material risk low audit risk low have to test control to rely on them some substantive testing (some accounts more because of the account nature) Material risk high audit risk high do more substantive work. ** don"t have to test controls, but have to understand controls. Did someone do something that will prevent or detect something: signature does not fully mean they authorized it, could have just signed it. Cannot confirm a control, but can confirm a balance: verify amount is correct most likely substantive, not worried about dollar amount control. Inspect documents for evidence of review and authorization: open in mailing room, entered in by someone not in bookkeeping, else risk they may write-off cheque. Observe client personnel perform acts (inventory count, etc) Analytical procedures (or substantive analytical: e. g. giving auditor evidence that balance is reasonable, interest expense in gl comfortable with control, but do substantive analytical . E. g. principle of loan * interest rate.
