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in an audit risk question part of the scenario is:
“the company now has 15 warehouses, some are owned and some rented from third parties. there will be inventory counts taking place at all 15 sites at the year end”
under the column of “Audit Risk”, the following is written:
“it is unlikely that the auditor will be able to attend all 15 sites for the inventory count and therefore may need to ensure that they obtain sufficient appropriate evidence over the inventory counting controls and completeness and existence of inventory for any warehouse not visited”
my question is: this paragraph is more like an audit response than an audit risk. what would be the audit risk in for this case?
this is an exam question and the response is from the paper: Minty Cole, dec 13
thank u
Audit risk is the risk that the FS contain a material misstatement that the auditors havent identified so that the incorrect audit opinion is given.
Audit risk consists of inherent risk, control risk and detection risk.
If the auditor cannot attend all inventory locations there is a detection risk and they will have to find ways of trying to obtain sufficient appropriate audit evidence with respect to inventory in locations not visited.
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