1. Task 3
2. For each significant financial statement account assertion, the inherent risk and control risk are assessed. The work performed around understanding the business provides the inherent risk assessment, while the results of any control testing provides the control risk assessment. The combination of these two risks can be known as overall risk assessment (ORA). The ORA determines the nature, timing and extent of the substantive procedures to be performed-that is, the detection risk to be mitigated by auditors.
3. The ORA is determined using the following table:

Control Risk

Noyers Ltd Audit Case Study

High

Medium

Low

Inherent Risk

High

Lowest

Lower

Medium

Medium

Lower

Medium

Higher

Low

Medium

High

Highest

There is an inverse relationship between the ORA and detection risk (DR).

Required

(Spreadsheet tab Task 3 identifies six financial statement accounts and related assertions assessed as being at risk for Noyers Ltd. Note that the control risk for these accounts/assertions has already been assessed by other members of the audit engagement team as indicated in spreadsheet tab Task 3.)

1. From the information that you have available to you about Noyers Ltd, assess the inherent risk for each of these five account/assertions (high, medium or low).
2. Justify your assessment of the inherent risk level for each of the five account/assertions.
3. Applying the qualitative audit risk model described above, determine overall risk assessment for each account/assertion and then determine the acceptable level of
4. detection risk.