Audit Risk and Response (5)

Question 1

Audit risk (systems)

Answer 1

New client systems/controls/staff impacting on amounts recorded in financial systems.

Increasing the risk of errors and risk of internal controls not operating effectively

Question 2

Auditors response to systems risk? (interim audit)

Answer 2

Undertake additional visits to assess effectiveness of controls appearing over areas affected

Question 3

Auditors response to systems risk? (extra work)

Answer 3

Perform extra work to document and evaluate new systems/controls, performing tests of controls where necessary

Question 4

Auditors response to systems risk? (sample sizes)

Answer 4

Increase sample sizes for substantive testing over financial statement areas impacted

Question 5

Audit risk (management)

Answer 5

Management has an incentive to manipulate performance, increasing risk of profits being overstated

Question 6

Example of management audit risk?

Answer 6

Renumeration or bank funding is reliant on performance

Question 7

Auditor’s response to management audit risk?

Answer 7

Focus on and increase testing on judgemental areas in FS

Question 8

Examples of focusing on and increase testing on judgemental areas in FS

Answer 8

Provisions
Revenue recognition accounting policies