TP 11

TATAP MUKA XI

AUDITOR’S RESPONSE TO ASSESSED RISK

2017

SPECIFIC LEARNING OUTCOME

 RISK OF MATERIAL MIS-STATEMENT AT THE ASSERTION LEVEL
 MANAGEMENT ASSERTION GROUP
 TEST OF CONTROLS
 SUBSTANTIVE PROCEDURES

Auditing 1
 TP 11 – 1

AUDIT RISK

 AUDIT RISK  RISK THAT AUDITOR CAN NOT FIND MATERIAL

MIS-STATEMENT AND DUE TO ENGAGING THE AUDIT
 SECOND STANDARD OF FIELD WORK

 ENGAGEMENT RISK  RISK OF SUFFERING HARM DUE TO

ACCEPTING THE CLIENT  SET UP DEFFERENTLY ?  PRO’S &
CON’S  ACCEPTABLE AUDIT RISK (AAR)
 TP 11 – 2
COMPONENT OF AUDIT RISK
ILLUSTRATION 6 – 12 (HAYES)
 TP 11 – 3
RELATIONSHIP BETWEEN INHERENT, CONTROL &
DETECTION RISK
ILLUSTRATION 6 – 14 (HAYES)
 TP 11 – 4
RISK BASED AUDIT
AUDIT IS ABOUT

THE RISK OF ACCEPTING & DOING THE AUDIT

 TP 11 – 5

ACCEPTABLE AUDIT RISK

 ENGAGEMENT RISK

 FACTORS
 USERS
 FINANCIAL DIFFICULTIES
 MANAGEMENT’S INTEGRITY
 TP 11 – 6
INHERENT RISK

 DEFINITION
 ERROR & FRAUD IN SEGMEN
 BEFORE CONSIDERING EFFECTIVENESS OF INTERNAL CONTROL
 FACTORS
ENTITY ENVIRONMENT
 NATURE OF BUSINESS  INDUSTRY TREND  MARKET
 PREVIOUS AUDIT  REGULATION
 INITIAL VS REPEAT  ACCOUNTING
 RELATED PARTIES  COMPETITION
 NON ROUTINE TRANSACTION
 JUDGEMENT ACCOUNTING
 MAKE-UP OF POPULATION
 FRAUDULENT REPORTING
 MIS APPROPRIATION OF ASSET
 TP 11 – 7

CONTROL RISK

 RISK THAT MIS-STATEMENT COULD BE DETECTED BY THE

EFFECTIVENESS OF INTERNAL CONTROL

 INEFFECTIVE CONTROLS  HIGH RISK

 EFFECTIVE CONTROLS  PDR INCREASE  EVIDENCE

DECREASE

 SET UP CONTROL RISK THROUGH UNDERSTANDING AND

TESTING THE CONTROLS FOR EFFECTIVENESS
 TP 11 – 8
RELATIONSHIP OF RISK, TOLERABLE
MIS-STATEMENT AND EVIDENCE
 TP 11 – 9

RELATIONSHIP OF RISK TO EVIDENCE

TABLE 9 – 4 (ARENS)
 TP 11 – 10

REVISING RISK AND EVIDENCE

IF THE ORIGINAL ASSESSMENT OF RISK (AAR, IR, CR) IS

DIFFERENT WITH THE ACTUAL CONDITION

 REVISE THE ORIGINAL ASSESSMENT

 CONSIDE THE EFFECT OF REVISION TO EVIDENCE  WITHOUT

RISK CONTROL MODEL
MANAGEMENT ASSERTION TP 11 – 11
 TP 11 – 12

TYPES OF TEST

 RISK ASSESSMENT  (RA)  AUDIT RISK MODEL

 TEST OF CONTROLS (TOC)
 SUBSTANTIVE TEST OF CONTROLS (STOT) FURTHER AUDIT
 ANALYTICAL PROCEDURES (AP) PROSEDURES
 TEST OF DETAIL BALANCES (TDB)

MEET THE AUDIT OBJECTIVE

 TRANSACTION RELATED MANAGEMENT
 BALANCE RELATED ASSERTION
 PRESENTATION & DISCLOSURES
 TP 11 – 13
TOC, STOT, AP, TODB
TERIMA KASIH