Define control risk and list seven general categories of misstatements that controls are intended to prevent, detect, and correct.
Answer to relevant QuestionsWhy does an inventory of Rolex watches have a high inherent risk, and why does the auditor expect management to have strong controls over this inventory? What does it mean if an overall audit plan is said to be cost effective? How do auditors develop a cost-effective overall audit plan? List the control objectives and the misstatement risk that each one relates to. What does the auditor need to understand about the flow of transactions in the auditee’s information systems? What challenges arise for management and the auditor when an auditee uses complex IT and/or is involved in e-commerce?
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