Audit Case Study Example | Topics and Well Written Essays - 2000 words

Audit - Case Study ExampleThe auditor should consider whether to acknowledge the commitment since intrinsical take chances increases the generally risk of the audit. It is often serious to set aside transactions into three types- routine, non-routine, and evaluation when valuing inherent risk. Little Diggers auditors may not practice session the system that gives the precise government issue to them, the result is mainly inherited by the risk factors as this system is apply to just a small section of the population as oppose to the whole population. This is prone to the mis debate that is said to be the inherent risk. The term inherent risk is applied in auditing and accounting, if there is higher likelihood of material misstatement at bottom thefinancial statement, the inherent risk is considered high .It is also used for the misstatement of the occupation that is there in the financial statement. If the auditors leave not lookout at these inherent threatens, there would be more inaccuracies in the financial statement, which certainly will lead the organization to the incorrect direction, and consequently the financial statement will not be presenting accurate and just outlook. The auditors had to come up with ways of making an error free or inherent risk free financial statement in order to make their company move in the precise direction by formulating correct assessments .As per the auditors opinion, inherent risk improves the auditors peril as the inherent risk is an element of it. It is therefore essential to minimize the inherent risk in order to diminish the auditors risk. Because of this, the auditors give the gate make improper decisions because the proof to back such view will be false. Detection risk Detection risk is essentially the risk that the measures applied by the auditors will fail to identify material misstatements in the financial accounts. Auditors in Little Diggers Ltd have to ensure accuracy and efficiency in the business wi th regard to the asset management, transactions, and their documentation in the monetary accounts. Besides this, the auditors look for various methods that aid them in measuring future risks that may affect their business. Auditors use a variety of methods to measure the risk, mainly therisk due to material misstatement Detection risk is allied to other relations i.e. the trade risk, material misstatement risk and its two major elements, which are the control risk and the inherent risk in general. If the material misstatement risk rises, it will lower the detection risk hence the auditors risk increases. The material risk increases when its essentials control risk and inherent risk increase. The correlation of the risks will assist the administration and the auditors to try such diverse reclaimable ways that will help reduce on risk levels. Control risk Control risk is the likelihood that a material misstatement exists in an allegation since either that misstatement was not barre d from entering entitys economic statements or it was not identified and approved by the internal control system of the unit. It is the craft of the organization and those responsible with authority to execute internal control system and uphold it properly. However if internal control system is discovering and correcting misstatements then inherent harms will creep in