Audit Opinion

Zaidh Uwais
Mind Map by Zaidh Uwais, updated more than 1 year ago
Zaidh Uwais
Created by Zaidh Uwais over 5 years ago
33
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Description

Mind Map on Audit Opinion, created by Zaidh Uwais on 10/07/2014.

Resource summary

Audit Opinion

Annotations:

  • Opinion is expressed based on the conclusion arrived at.
1 Conclusion

Annotations:

  • Conclusions will be based on the audit evidence obtained
1.1 Audit Evidence

Annotations:

  • Audit evidence should be Sufficient and Appropriate to reduce the AUDIT RISK to acceptably low level.
1.1.1 Audit Risk

Annotations:

  • The audit risk should be reduced to an acceptably low level by obtaining sufficient and appropriate audit evidence.
1.1.1.1 Detection Risk

Annotations:

  • It is the risk that the auditor might  give a wrong opinion when the financial statements are materially misstated. Higher the risk of material misstatement lower the detection risk that can be allowed. Detection risk can be reduced by proper planning, review of the audit and appointing skilled and specialized team for the performance of the audit.
1.1.1.2 Risk of Material Misstatement

Annotations:

  • It is assessed on understanding the entity and its environment including its internal controls. It is the risk that the transaction, account balance or disclosure carry a material misstatement - a fraud or error that is reasonably assumed to affect the economic decision of the readers of the financial statements.
1.1.1.2.1 Financial Statement Level

Annotations:

  • Risk that has a pervasive impact on the financial statements affecting more than one assertions.
1.1.1.2.2 Assertion Level
1.1.1.2.2.1 Inherent Risk

Annotations:

  • Some transactions, account balances and disclosures have an inherent risk of misstatement. e.g. more complex the transaction higher is the inherent risk. Business risk might have an impact on the inherent risk as well.
1.1.1.2.2.1.1 Assess the nature, timing and extent of the other audit procedures to be performed

Annotations:

  • Two types of audit procedures exist, 1. Risk Assessment Procedures 2.Other Audit Procedures Other audit procedures include the test of operating effectiveness and the test of detail.
1.1.1.2.2.2 Control Risk

Annotations:

  • The effectiveness of the design, implementation and maintenance of the internal control implemented by the management to address identified risks that may affect the preparation of the financial statements.
1.1.1.2.2.2.1 Assess the nature, timing and extent of substantive tests to be performed
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