Question

Identify the elements of the financial report audit process.

Answer 1

Solution. An organization operating business in today's global competitive economic market needs to record financial statements along with social accounting to sustain. Such financial statements are evaluated and inspected through audit procedures to reflect true financial position during an accounting period to facilitate decision making purposes.

Elements of the financial report audit process are discussed down:

1. Audit Assertions represent the management's claims while generating, preparing and representing financial statements encompassing assets and liabilities during an accounting period under established rules and regulations. Such facilitates auditor's understanding of the transactions in the financial statements disclosures to give opinion.

2. Procedure of Audit encompasses auditor's process of generating information, internal control and audit evidence to provide audit opinion. An auditor acquires such data through analytical review, inquiry, observation and inspection of information provided by the management during an accounting period to prevent material misstatement and fraudulent activities.

3. Audit Risk represents the presence of material misstatement in spite of the audit opinion in favour of the organization. Such risks can be in form of material misstatement, inherent risk, control risk, detection risk, etcetera. Lack of proper internal control can develop such risks and lack of detection of such risks can increase fraudulent activities internally. Proper communication of information and monitoring can help minimize such risks to provide true financial opinion to facilitate decision making purposes by both internal and external users.