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Audit risk vs Risk of material misstatements

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Audit risk vs Risk of material misstatements

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 22, 2017 at 12:23 pm #373655
    nowshin123
    Member
    • Topics: 1
    • Replies: 2
    • ☆

    Hi Mike
    I always get confused over identification of audit risk and risk of material misstatements from given scenario . Is there any technique that I can separate two issues quickly and swiftly.
    Thanks

    February 22, 2017 at 2:36 pm #373683
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    I presume that you know that audit risk is the product of risk of material misstatement multiplied by detection risk and that

    risk of material misstatement is the product of inherent risk multiplied by control risk

    So, whenever you identify a risk, ask yourself into which pigeon hole that risk would best fit

    Assuming, of course, that you are aware of the meanings of the various expressions:

    inherent risk
    control risk
    detection risk

    I have to admit that I too find it easy to merge the separate headings and I have to stop and think seriously hard as to whether a risk is a detection risk of a risk of material misstatement

    What about this …

    … risk of material misstatement is due to failings on the part of the client whereas …

    … detection risk is a failing of the auditor

    Try that and see if it works for you

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  • The topic ‘Audit risk vs Risk of material misstatements’ is closed to new replies.

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