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382ACC Auditing Assignment: Audit and Internal Control

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Added on  2020-05-28

382ACC Auditing Assignment: Audit and Internal Control

   Added on 2020-05-28

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Audit and Internal Control 1AUDIT AND INTERNAL CONTROLBy (Student’s Name)Professor’s Name College Course Date
382ACC Auditing Assignment: Audit and Internal Control_1
Audit and Internal Control 2How business risks translated to audit risk for an AuditorFinancial risk: it will translate in audit risk in case the Company’s cash flows areinadequate to fulfill the financial obligations. This will make shareholders to lose moneywhich they initially invested in the company. When the auditor realizes that the financialstatement is incorrect because of the cash flow, he/she will give a clear report of the factstated (audit risk) ((William, Glover and Prawitt 2016)). Expansion Risk: This translate into audit risk in a situation where the Manager ofthe company has less information and are unable to understand the risk associated withgrowing businesses. When the cost of growing increases, profit of the business willremain constant or falls and this will make financial statement incorrect. Hence, theauditor will give the audit risk to help him in his final report.Information technology risk: Companies that relies on IT systems in performingdaily activities faces threat in their system and if not address may make them perform ata loss. If the threat affects the finance department it may interfere with the actual dataavailable and hence, the financial statement will be incorrect. Auditor may then use theaudit risk collected to give a report of his/her opinion.Cyber security RISK: This is a business issue because most of the companiesare more digitized which means they are exposed to many number of threats.Therefore, they mostly encounter risk of security. Modern technologies are providingmore advance tools which are being used to attack the business. The auditor maydetect these items and translate them into Audit risk (Hayes, Wallage and Gortemaker2014).
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Audit and Internal Control 3Project Risk: These are uncertain events which when occur cause an effect onthe performance of project objectives. Some of the events can be controlled by theorganization but some may originate from external and therefore cannot be easilyidentified by the organization. The auditor will therefore use the available information inthe audit risk to in order to give a clear standing of the organization. Effects on Audit Assessment of Audit RiskAudit risk is that risk which the auditor could issue an unqualified report becauseof the failure of the auditor to detect substantial/material misstatement because of fraudor error. In this case, the auditor expresses an inappropriate opinion on financialstatement. In other words, the auditor issues the incorrect opinion on financialstatements. Examples include issuing an unqualified audit report whereby a qualificationis justified reasonably; issuing a qualified audit opinion whereby no qualification isessential; failing to stress a substantial matter in audit report and provision of an opinionon financial statement whereby no such opinion could be given reasonably because of amaterial limitation of audit performance scope (Hayes, Wallage and Gortemaker 2014).The audit risk has three elements or components including inherent risk, control risk anddetection risk. This can be caused by various factors including financial risk, expansionrisk, ICT risk, cyber security risk and project risk. The effects of these factors on theaudit risk assessment is detailed below: Financial RiskThe assessment of audit risk is greatly dependent on financial risk. For example,in concealment in this type of risk will automatically increase the likelihood of audit riskas the audit directly fail to get material facts (Allen and Hilton 2017). For instance, where
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