Audit Risk Flashcards

Flashcards on audit risk components and related concepts.

Intangible Assets (Overstated)

Occurs when research costs are capitalized instead of expensed, amortization is not charged on development projects generating benefits, or impairment charges are not made for impaired assets.

Intangible Assets (Understated)

Occurs when development costs are expensed instead of capitalized.

Revenue (Overstated)

Occurs when it is recognized before the performance obligations within the contract have been fulfilled.

Control Risk

The risk that a misstatement that could occur and that could be material, will not be prevented, or detected and corrected on a timely basis by the entity's controls.

Detection Risk

The risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material.

Sampling Risk

The risk that the auditor's conclusion based on a sample is different from the conclusion that would be reached if the whole population was tested, i.e. the sample was not representative of the population from which it was chosen.

Non-Sampling Risk

The risk that the auditor's conclusion is inappropriate for any other reason, e.g. the application of inappropriate procedures or the failure to recognize a misstatement.

Professional Scepticism

An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.