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Cloud 9 Assignment 8
Transcript of Cloud 9 Assignment 8
ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards
- risk of material misstatement are made up of inherent and control risk
Control risk is a function of the effectiveness of the design, implementation and maintenance of internal control by management,
Inherent risk is “the susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements before consideration of any related controls
For a given level of audit risk, the acceptable level of detection risk bears an inverse relationship to the assessed risks of material misstatement at the assertion level
Detection risk relates to the nature, timing, and extent of the auditor’s procedures that are determined by the auditor to reduce audit risk to an acceptably low level.
Recap - Remember the financial statement assertions
ASA 315 – Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment
identifies these assertions under three categories
Class of Transaction and events
(Income statement) – Occurrence, Completeness, Accuracy, Cut off and Classification
Account balances (Balance Sheet)
- Existence, Rights and obligations, completeness, valuation and allocation
How items are presented and disclosed
(disclosure/format)– Occurrence, rights and obligations, Completeness, Classification and understandability and Accuracy and Valuation
Auditing standards do not demand that we must test all assertions but it is prudent to do so.
- Auditor must perform audit that is appropriate enough to collect sufficient appropriate audit evidence s
Cloud 9 Pty Ltd
Period ending 31 Dec 2010
Assessing detection risk
Cash Substantive Procedures
Accounts Receivable Substantive Procedures
Revenue Substantive Procedures