Three things that are likely to come up.
1. Expectation Gap
2. Business risk 5 elements
3. That p.60 - Learn how to identify
Expectation - risk that affect what you will expect to see in that financial statements
Client Viability - risk of the organisation not being viable
Audit risk (of specific assertions) - does the risk mean it is likely that an item is incorrectly valued, not complete, inaccurate etc.
Control environment - risk that make misstatemts more likely e.g. management under extreme pressure to meet targets, etc.
Clints advice/ comments for client - is this a risk that the the auditor should inform the client about.
What is Auditing: Auditing is a professional engagement that allows an independent auditor to provide a high but not absoulte level of assurance through issuing a positive opinion about the creditibiliy of assertion or a set of assertions base on accountability.
Auditing: provide assurance about the reliability of information in financial statement
assurance is improving the quality of information.
Expection gap:It is the difference between the auditor understanding of their duties and what the user expect the auditors to do.
Three components of EG: Defficient performance, defficient standard, unreasonable expectation.
The two way to improve: better auditing and public education.
Completeness means ' all transatcion and events that should have been recoreded has been recorded.
Accuracy means amounts and data relating to recorded transactions and events have been recorded appropriately
occurance means transactions and events that have been recorde have occured andpertain to the entity
cut-off means ' transactions and evens have been recorded in the correct accounting period being examinded
classification means 'transactions and events have been recorded in the proper accounts.
audit risk = risk of material misstatemnt X dection risk. and risk of material misstatement can be broken down into inherent risk and control risk. detection risk can be broken down into smapling risk and non- sampling risk
Cost of fail audit
Lost of reputation
NZICA discipline
Legal consequence
Materiality
The Magnitude of an omission or misstatment of accounting information that, in light of surrounding circumstance, makes it probable that the judgment of a reasonable person relying on the information would have been change or influenced by the omission or misstatment.
Think about it if Gandalf is a ninja, he will be so awesome. he can stop you with 'You shall not pass' cause he's Gandalf and you won't know cause he's Ninja. And you will be like 'WTF I CAN"T PASS' :D STONG!
