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16 Cards in this Set
- Front
- Back
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Audit Risk
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Risk that an auditor will issue an unqualified opinion on materiallly misstated financial statements
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Materiality
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Magnitude of an omission or misstatement of accounting information that makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced
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Inherent Risk
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The susceptibility of an assertion to material misstatement, assuming no related controls
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Detection Risk
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The risk that the auditor will not detect a material misstatement
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Engagement Risk
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The risk of auditor's exposure to loss or injury due to litigation
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AR (Audit Risk)
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=IRxCRxDR
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IR
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Inherent Risk
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CR
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Control Risk
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DR
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Detection Risk
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Audit Risk Model
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AR=IRxCRxDR
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AIO
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Audit Committee
Ratio and Trends Observation |
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Fraud Triangle
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ROI
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ROI
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Rationalization
Opportunity Incentive |
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Applying Materiality
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PTE
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PTE
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Planning 3-5%
Tolerate 50-75% Evaluate |
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Engagement Letter
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To formalize agreement between client and customer, it is a contract. It outlines management responsibilities and auditors responsibilities, in what time frame, that it will be conducted by Auditing Standards, type of audit procedures, and that it will not detect all errors.
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