The risk that the financial statements are materially misstated prior to audit refers to the risk of material misstatement. Are auditors responsible for identifying and assessing the risk of material misstatement? What does the term "material misstatement" mean? Support your answer with an example from the ZAIN Financial Statements 2022.
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- Define risk of material misstatement. At what level of the financial statements do auditors measure RMM? Describe how auditors assess the RMM. What role does RMM play in substantive testing?Define the danger of substantial misrepresentation. RMM is measured by auditors at what level of the financial statements? Explain how auditors evaluate the RMM. What part of substantive testing does RMM play?Which of the following are reasons that auditors conduct analytical procedures at the risk assessment phase of the audit? Select all that apply. O assist with the identification of risk assess if the financial statements reflect the auditor's knowledge of their client O identify accounts at risk of material misstatement O highlight unusual fluctuations in accounts O helps with the calculation of materiality
- tch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.The audit risk model includes the four risks listed below. Match the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.1. Describe how the "culmination" of the audit process looks like. 2. In the final stage of a risk-based audit, how shall the auditor know that sufficient appropriate audit evidence has been obtained to support the conclusions reached for the auditor's report to be issued? 3.What are the major reasons for modifying an otherwise unmodified auditor's report?
- ASA570.10 requires the auditor to particularly evaluate the going concern problems and the related risk as part of the audit strategy and processes. What are the implications and the consequences for the audit if it is concluded that the going concern assumption is inappropriate and, as a result, the entity being audited is highly unlikely to continue in business in the foreseeable future? In your response and in your own words, discuss six (6) typical indicators of going concern problems and state the considerations and the additional procedures which should be included as part of the audit program.Describe a situation that would require an auditor to give an unmodified opinion without a standard report. Describe a situation that would cause an auditor to modify their opinion. Analyze possible actions an auditor might take if a client’s financial statements depart from GAAP. Do you think the demand for assurance services will increase or decrease in the future? Explain.When assessing and identifying Control Risk or Risk of Material Misstatement, the auditor may answer these following question(s) a. What is the risk of material misstatement (Identify Potential Risk) b. What could go wrong given this potential risk of material misstatement c. Could the risk lead to material misstatement (Yes/NO) d. All the above questions
- Explain the components and objectives of audit risk? How is audit risk involved in assessing the likelihood that fraud may occur and where it's most likely to occur within the financial statements? How does risk assessment during the planning stage of an audit impact the tone for the entire audit engagement?Which sentence below is true about audit risk: A. Audit risk is the risk that a company may hire an incompetent auditor. B. Audit risk can be completely eliminated through appropriate sampling of transactions. C. Audit is what creates the demand for an audit. D. Audit risk is the risk that a "clean" opinion will be issued when, in reality, the financial statements are materially misstated..When performing a financial statement audit, auditors are required to explicitly assess the risk of material misstatement due to:Select one: a. Illegal acts. b. Fraud. c. Business risk. d. Errors.