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6 Cards in this Set

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  • Back
What statement acknowledges audit risk in an auditor's standard report?
that the auditor obtained "reasonable assurance" that the FS are free of material misstatement
What are the 3 types of misstatement?
1. Misapplies GAAP
2. Omits necessary information
3. Departs from fact
What is the audit risk formula?
AR = IR x CR x DR
Audit Risk = Inherent Risk x Control Risk x Detection Risk
What is inherent risk?
The susceptibility of an assertion to a material misstatement, assuming that there are no related internal control policies or procedures. The risk that misstatement is greater for some assertions than for others.
What is control risk?
The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal control policies or procedures.
What is detection risk?
The risk that the auditor will not detect a material misstatement that exists in an assertion. Detection risk is a function of the effectiveness of an auditing procedure and of its application by the auditor.