Audit Risk (2)

Question 1

What is inherent risk?

Answer 1

The suspectibility of an assertion about a class of transaction, account balance or disclosure to a misstatement

Question 2

What could this misstatement be?

Answer 2

Either individually or when aggregated with other misstatements, before consideration of any related internal controls

Question 3

What is inherent risk affected by?

Answer 3

Nature of the entity

Question 4

Nature of entity example (industry)

Answer 4

Industry in which the audit client operates

Question 5

Nature of entity example (regulations)

Answer 5

Any regulations it is subject to

Question 6

Nature of entity example (F)

Answer 6

Financial statements

Question 7

Financial statements (calculations)

Answer 7

Include complex calculations

Question 8

Financial statements (standards)

Answer 8

Are subject to complex accounting standards

Question 9

Financial statements (estimates)

Answer 9

Include amounts derived from accounting estimates rather than routine, factual data