Potential risk is the risk which is an expected in an action by the Auditor. This risk is the damage factor to the genuineness of the operations of a client. To Explain: The potential risk areas and explanation for these risk areas and the description of potential risk areas affecting the audit engagement .

Question

Please decide control risk, inherent risk and planned audit evidence will be affected (increase or decrease) in the following cases, and then list your analysis: i. You determine through analytical procedures that working capital, debt to equity ratio and other indicators of financial stability have worsened during the year. ii. In auditing inventories, you obtain an understanding of the internal control structure and perform test of controls. You find it significantly improved compared with that of the preceding year. You also observe that due to technology changes in the industry, the client's inventories may be somewhat obsolete. Please do fast ASAP fast

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Question

Chapter 7, Problem 19RQSC

a)

To determine

Introduction: Potential risk is the risk which is an expected in an action by the Auditor. This risk is the damage factor to the genuineness of the operations of a client.

To Explain:The potential risk areas and explanation for these risk areas and the description of potential risk areas affecting the audit engagement.

b)

To determine

Introduction: Potential Skepticism is the alertness factor of the working style of an Auditor who is prepared to handle any probable misstatement during the course of audit.

To Explain:The data which compels the auditor to use professionalism level while exercising in audit.

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Please decide control risk, inherent risk and planned audit evidence will be affected (increase or decrease) in the following cases, and then list your analysis: i. You determine through analytical procedures that working capital, debt to equity ratio and other indicators of financial stability have worsened during the year. ii. In auditing inventories, you obtain an understanding of the internal control structure and perform test of controls. You find it significantly improved compared with that of the preceding year. You also observe that due to technology changes in the industry, the client's inventories may be somewhat obsolete. Please do fast ASAP fast

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