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Audit Risk
Audit risk (also referred to as residual risk) as per ISA 200 refers to the risk that the auditor expresses an inappropriate opinion when the financial statements are materiality misstated. This risk is composed of: * Inherent risk (IR), the risk involved in the nature of business or transaction. Example, transactions involving exchange of cash may have higher IR than transactions involving settlement by cheques. The term ''inherent risk'' may have other definitions in other contexts.; *Control risk (CR), the risk that a misstatement may not be prevented or detected and corrected due to weakness in the entity's internal control mechanism. Example, control risk assessment may be higher in an entity where separation of duties is not well defined; and * Detection risk (DR), the probability that the auditing procedures may fail to detect existence of a material error or fraud. Detection risk may be due to sampling error or non-sampling error. Audit risk can be calculated as: :AR ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
International Standards On Auditing
International Standards on Auditing (ISA) are professional standards for the financial audit, auditing of financial information. These standards are issued by the International Auditing and Assurance Standards Board (IAASB). According to Olung M (CAO - L), ISA guides the auditor to add value to the assignment hence building confidence of investors. The standards cover various areas of auditing, including respective responsibilities, audit planning, Internal Control, audit evidence, using the work of other experts, audit conclusions and audit reports, and standards for specialized areas. Use of the ISAs * European Union: The Audit Directive of 17 May 2006 enforces the use of the ''International Standards on Auditing'' for all Statutory audits to be performed in the European Union. The Audit Directive of 17 May 2006 is important in order to ensure a high quality for all statutory audits required by European Union law, Community law requiring all statutory audits be carried out on t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |