RELEVANT TO ACCA QUALIFICATION PAPER F8 AND
PERFORMANCE OBJECTIVES 17 AND 18
Audit risk
Candidates studying Paper F8, Audit and Assurance, are required under the
syllabus to: ‘Explain the components of audit risk and explain the risks of
material misstatement in the financial statements’.
This element of the syllabus has been examined in the last three sessions of
Paper F8 – in June 2010, December 2010 and June 2011. However, the
performance of candidates has on the whole been unsatisfactory. This article
aims to identify the most common mistakes made by candidates as well as
clarifying how audit risk questions should be tackled in order to maximise
marks.
An example question requirement relating to audit risks is as follows:
Describe the audit risks and explain the auditor’s response to each risk in planning
the audit of XYZ Co.
Previously examined risk questions have carried a mark allocation of 10 marks.
However, a significant majority of candidates have not passed this part of the
question. Common mistakes made include:
? providing definitions of the audit risk model, even though this was not
part of the question requirement
? a lack of understanding of what audit risk is and providing business risks
instead
? not providing an adequate response to the risk. This needs to be from
the perspective of the auditor and not from management’s perspective
? a limited range of risks identified, often just focusing on one area such
as going concern.
Audit risk definitions
Audit risk is defined as ‘the risk that the auditor expresses an inappropriate
audit opinion when the financial statements are materially misstated. Audit
risk is a function of the risks of material misstatement and detection risk’.
Hence, audit risk is made up of two components – risks of material
misstatement and detection risk.
Risk of material misstatement is defined as ‘the risk that the financial
statements are materially misstated prior to audit. This consists of two
components… inherent risk … control risk.’
Inherent risk is ‘the susceptibility of an assertion about a class of transaction,
account balance or disclosure to a misstatement that could be material, either
編輯推薦:
(責任編輯:)