When planning to perform an audit, an accountant must have a clear understanding of audit risk and its components. The existing audit risk components consist of: 1. Control Risk 2. Detection Risk 3. Inherent Risk For each of the following situations, determine the component of audit risk that exists and explain why. 1. The client failed to find fraud committed by his employees as early as possible because the client did not reconcile the bank balance every month. 2. The auditor's confirmation of accounts receivable failed to detect material misstatements in the sales and accounts receivable accounts. 3. Procedure for disbursement of money at the client which is carried out without the approval of the authorized official
When planning to perform an audit, an accountant must have a clear understanding of audit risk and its components. The existing audit risk components consist of: 1. Control Risk 2. Detection Risk 3. Inherent Risk For each of the following situations, determine the component of audit risk that exists and explain why. 1. The client failed to find fraud committed by his employees as early as possible because the client did not reconcile the bank balance every month. 2. The auditor's confirmation of accounts receivable failed to detect material misstatements in the sales and accounts receivable accounts. 3. Procedure for disbursement of money at the client which is carried out without the approval of the authorized official
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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When planning to perform an audit, an accountant must have a clear understanding of audit risk and its components.
The existing audit risk components consist of:
1. Control Risk
2. Detection Risk
3. Inherent Risk
For each of the following situations, determine the component of audit risk that exists and explain why.
1. The client failed to find fraud committed by his employees as early as possible because the client did not reconcile the bank balance every month.
2. The auditor's confirmation of accounts receivable failed to detect material misstatements in the sales and accounts receivable accounts.
3. Procedure for disbursement of money at the client which is carried out without the approval of the authorized official
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