Assessing Materiality and Risk Simulation. The reason the three risks that compose audit risk are interrelated is that they support the assessor like an auditor to ascertain the extent of auditing systems and procedures in a certain balance of account or in a group of transactions.
Why is materiality allocated only to those accounts that are sampled? The component of audit risk within the control of the auditor is detection risk. I will also explain if there is any component of audit risk within the control of the auditor.
More Essay Examples on Auditing Rubric Auditing accounts are done to protect the investors, shareholders, banks, and to give assurance that the information is true and correct.
Retrieved by Jamie Casey from http: Materiality deals with the sampled accounts, so the auditor must convey a conclusion that the financial accounting of those accounts sample are in accordance with the accounting standard. Detection risk is the only component of audit risk within the control of the auditor, by means of knowing the range of the audit procedures.
The detection risk is the risk that the auditor will not detect such misstatements. Below I will explain why certain accounts have to be audited percent and why materiality is allocated only to those accounts that are sampled.
I have explained why certain accounts have to be audited percent and why materiality In this simulation for the balance sheet accounts, I selected the audit risk at high, inherent risk at low, and control risk at low for a detection risk of high.
Chapter Materialtiy and Risk. Materiality is allocated only to those accounts that are sampled because the accounts that are audited percent do need to have materiality allocated to them.
Every level of audit risk has an opposite connection that exists between assessed levels of controls, inherent risk, and level of detection risk. Inventory, property, plant and equipment, and accounts payable involve numerous transactions and would be time-consuming to audit them thoroughly.
Detection risk can be controlled by the auditor through the scope of the audit procedures performed. Lastly, I will explain how the three risks that make up audit risk inter-relate.
References Assertions, Audit Risk and Materiality. Conclusion Materiality is a function of the time, the situation, and the people involved. Simulation For Sweet Truths, certain accounts such as cash, lines of credit, and intangibles have to be audited percent because they are generally composed of few transactions that are easy to verify.Resources: Assessing Materiality and Risk simulation on student website Complete the Assessing Materiality and Risk simulation located on the student website.
. ACC Week 3 Team Assignment Assessing Materiality and Risk Simulation Answer ACC Week 3 Team Assignment Assessing Materiality and Risk Simulation Resources: Assessing Materiality and Risk located on the Week Two Materials page Complete the simulation and prepare a word total (not per question) response to.
Assessing Materiality and Risk Simulation In this paper we are going to look at four questions that deal with the assessing materiality and risk simulation.
The first question that we will be looking at is why certain accounts have to be audited %. Assessing Materiality and Risk Simulation 2 only time to audit three accounts %.
The accounts that are chosen are the ones that would be the most important to financial statement users, and may include cash, lines of credit, and intangibles%(4). Assessing Materiality and Risk Simulation Learn Team A ACC June17, Assessing Materiality and Risk Simulation Certain accounts, such as cash, long term debt and short term borrowings, and intangibles, are audited % because they are very important to the audit process and/or industry, or simply because they are easily.
Assessing Materiality and Risk Simulation The objective of the audit of financial statements is to enable the auditor to express an opinion if the financial statements are prepared in accordance with an identified financial reporting framework - Assessing Materiality and Risk Simulation introduction.Download