Identify 3 different factors that may have an impact on the risk of performing the audit (i.e. inherent risk, control risk, etc) and how the factor identified impacts the risk of the audit (i.e. increases/decreases risk). One of your firm's longtime audit clients owns a group of companies and recently added a new addition to the group - Stained Glass Inc - which your firm will be auditing for the first time this year. The manager of Stained Glass Inc, Jennifer, is relied upon by the owner to run the day-to-day operations of the company with minimal oversight. Jennifer's annual bonus is based on a percentage of pre-tax net income per the audited F/S. Jennifer has hired her sister to perform all of the accounting for Stained Glass Inc as Jennifer does not know much about accounting. Additionally, you are told that the bank relies on the audited F/S of the group to make lending decisions.
Identify 3 different factors that may have an impact on the risk of performing the audit (i.e. inherent risk, control risk, etc) and how the factor identified impacts the risk of the audit (i.e. increases/decreases risk).
One of your firm's longtime audit clients owns a group of companies and recently added a new addition to the group - Stained Glass Inc - which your firm will be auditing for the first time this year. The manager of Stained Glass Inc, Jennifer, is relied upon by the owner to run the day-to-day operations of the company with minimal oversight. Jennifer's annual bonus is based on a percentage of pre-tax net income per the audited F/S. Jennifer has hired her sister to perform all of the accounting for Stained Glass Inc as Jennifer does not know much about accounting. Additionally, you are told that the bank relies on the audited F/S of the group to make lending decisions.
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