BU477 Lecture Notes - Lecture 9: Inverse Relation, Audit Evidence, Financial Statement
Document Summary
Applying materiality reporting issues: auditor will conclude on the overall reasonableness of the financial statement using the benchmark of overall materiality. Risk and audit planning: assessing and managing risk is the key to conducting a quality audit. If risk is pervasive (meaning it affects overall financial reporting risk), then auditor will adjust the overall audit strategy, adjustment could be: assign more experienced staff or specialists to the engagement. Instruct staff to use a heightened level of professional skepticism: closer supervision and review. Inverse relationship between acceptable audit risk and planned level of substantive testing. Inherent risk: revenue cycle medium (expected some misstatements, acquisition and payment cycle high (expected many misstatements, human resource and payroll cycle low (expected few misstatements) Inventory and repayment cycle high (expected many misstatements: capital acquisition and repayment cycle low (expected few misstatements, control risk, revenue cycle - medium, acquisition and payment cycle - low, human resource and payroll cycle - low.
