In: Accounting
Summarise risks, controls, and procedures for Plant, Property, and Equipment. The summary should identify eight to twelve meaningful risks of material misstatement or "what can go wrong" for the Plant, property, and Equipment. For each material misstatement or "what could go wrong" explain: (100 points)
> SPECIFIC AUDIT OBJECTIVES
> RISK OF MATERIAL MISSTATEMENT OR “WHAT COULD GO WRONG”
> RELEVANT FINANCIAL STATEMENT ASSERTION(S) eg. completeness, existence, cutoff etc
> ONE OR MORE CONTROLS YOU WOULD EXPECT THE COMPANY TO EMPLOY TO PREVENT OR DETECT “WHAT COULD GO WRONG”
> ONE OR MORE CONTROL TESTS YOU WOULD EXPECT THE AUDITORS TO PERFORM TO ASCERTAIN THE CONTROLS ARE EFFECTIVE
> ONE OR MORE SUBSTANTIVE PROCEDURES YOU WOULD EXPECT THE AUDITORS TO PERFORM TO MEET THE SPECIFIC AUDIT OBJECTIVES
AUDIT RISK
Basically, audit risk is the risk arising from carrying out audit work. It is the risk of the auditor 'suffering loss' as a result of giving an inappropriate audit opinion. Is related to materiality, as it is the risk that the auditor come to an invalid conclusion in audit report, namely that either:
* The audit report is unqualified but subsequently material error is found in the financial statement.
* The audit report is qualified but subsequently no material error is found in the financial statement.
This may arise from:
* Not gathering appropriate audit evidence.
* Being deliberately misled by those providing the evidence that conceal evidence that would have led to a different opinion, or who falsify evidence.
* Misinterpreting (drawing inappropriate conclusions from) the evidence gathered.
Audit Risk = Inherent Risk x Control Risk x Detection Risk.
CONTROL RISK
It is the risk that a misstatement that could occur in an account balance or class of transactions and that could be material either individually or when aggregated with misstatement in other balance or class, would not be prevented or detected and corrected on timely basis, by the accounting and internal control system.
Identifying and Assessing the Risks of Material Misstatement
To provide a basis for designing and performing further audit procedures, the auditor should identify and assess the risks of material misstatement at
For this purpose, the auditor should:-
AUDIT OBJECTIVE
The main objectives of audit are known as primary objectives of audit. They are as follows:
Subsidiary Objectives of Audit