AUDITING

Auditing



Auditing

2) Toady.com

I will issue qualified report to toady.com as they are not showing proper disclosure. As Non-standard audit report can be either unqualified, positive evaluation, or reporting financial position, but with some reservations. The reasons for non-standard audit report are: the use of different views of the audit firm ,for example, in the case of listening reporting different, independent divisions of one corporation by independent audit firms), changes in the audited firm's accounting policies. Some financial uncertainty or institutional nature. (e.g., part of the company audited in an incomplete legal process with an unpredictable outcome, the lack of effectiveness of internal control system), etc.

In the quantitative method, one will use the following model of audit risk: Audit risks formula:

P = P and P nm * k * P and

i. P nm - inherent risk;

ii. P to - control risk;

iii. P and - the risk of detection.

In practice, the audit risk model can be applied in several ways.

1. setting the components of audit risk (i.e.| inherent risk, control risk, detection risk), the auditor may determine its level.

2. The emphasis transferred to the account value detection risk and the corresponding number of necessary audit evidence. This is a more efficient way. In this case, the audit risk model is as following:

P and P = P / (P * P nm a)

3. The most common way to use the audit risk model is to track the relationship between the components of audit risk and the level of audit risk, quality and quantity of audit evidence required.

4a) Components

Inherent risk

Susceptibility balance in the accounts or classes of transactions distortions that may be significant, assuming the lack of internal controls. In accordance with standard in assessing inherent risk in the process of developing an overall plan for auditing, the financial statements rely on their professional opinion, to consider the following factors:

1. Experience and knowledge management entity, changes in its composition for a specified period;

2. Unusual pressure on the leadership of the entity.

3. Nature of the entity;

4. Factors affecting the industry in which the entity operates (Braiotta, 2004).

Control risk

The risk that the distortion that may occur with respect to the balance of accounts or accounting classes of transactions and be substantial will not be timely prevented or detected and corrected with the accounting and internal controls (Harrison, 1995). Some or all of the prerequisites of financial reporting control risk assessed as high, if:

1. Accounting systems and internal controls are weak entity.

2. Assessment of accounting and internal control the entity to be feasible.

3. Specific control risk is always the case, since there are limitations of accounting and internal controls.

Detection risk

The risk that audit procedures on the merits is not possible to detect the distortion of the account balances of accounting or groups of operations that may be significant, either individually or when aggregated with misstatements of balances in other accounts or the accounting of transactions. In developing the approach to audit, the auditor considers the preliminary assessment of control risk; assess ...