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Component of audit risk within the control of the auditors

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Is any component of audit risk within the control of the auditor? Explain.

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Absolutely yes. Audit risk is defined as the possibility that an audit firm may issue a financial statement that is materially misstated. If the financial statements contain disclosures in either the opinion or the footnotes that would lead a reader to understand certain risks, that is not what audit risk is about.

It is more about the fact that the auditors may not discover some ...

Solution Summary

The 248 word solution lists the types of audit risk, and explains the position of auditors in terms of risk assessment.

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See Also This Related BrainMass Solution

9-23 (Detection risk and audit evidence) risk components matrix

9-23 (Detection risk and audit evidence) Shown below are five situations in which the auditor wishes to determine planned acceptable levels of detection risk and the planned levels of evidence needed for specific financial statement assertions. The auditor has used judgment in arriving at the nonquantitative expressions for various risk factors.
Situation
A B C D E
Desired audit risk Very low Very low Very low Very low Very low
Assessed inherent risk Maximum High Moderate Low Maximum
Planned assessed level of control risk Low High High Moderate High
Planned assessed level of analytical procedures Moderate Moderate Low Low High
Planned assessed level
of tests of details risk
Planned evidence

Required
a. Using the risk components matrix in Figure 9-4, determine the acceptable level of tests of details risk for each situation.

b. Rank the five situations from the most evidence required from substantive tests (1) to the least evidence required from substantive tests (5). You may have ties.

c. Explain your ranking of situation D.

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