Explain the term audit risk.

Question

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Answer 1

Question

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.

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Blake Enterprises purchased $350,000 worth of land by paying $35,000 cash and signing a $315,000 mortgage. Immediately prior to this transaction, the corporation had assets, liabilities, and owner's equity in the amounts of $200,000, $50,000, and $150,000, respectively. What is the total amount of Blake Enterprises' assets after this transaction has been recorded?

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Answer 2

Question

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.

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Answer 3

Question

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.

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Answer 4

Question

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.

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Answer 5

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.

Answer 6

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.

Answer 7

Chapter 4, Problem 1RC

To determine

Explain the term audit risk.

Answer 8

Expert Solution & Answer

Explanation of Solution

Audit Risk:

It is the probability that in the materially misrepresented financial statements, the audit team has expressed an audit opinion that is inappropriate. Despite the audits being well planned and performed, the audit risk exists.

The audit risk can be further broken down into three types of risks. These are:

Inherent risk:It is the probability of a fraud or an error to enter into the accounting system that is used to develop the financial statements.
Control risk:It is the probability of a failure in detection or prevention of a fraud or an error by the internal controls.
Detection Risk:It is the probability that the auditor would not be able to detect the fraud or an error, given that they have already entered the accounting system.