Risk Analysis in Auditing and Assurance

This assignment delves into the risk assessment process for CBA Ltd., a financial institution. It examines various inherent risks, including those related to business resilience, data management, and people capability, alongside operational and data management risks. The assignment highlights potential impacts of these risks across different accounts and emphasizes the importance of audit procedures in mitigating them.

AUDITING AND ASSURANCE
Auditing and Assurance
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Table of Contents
Answer to Part 1A and 1B.........................................................................................................0
References..................................................................................................................................0

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Answer to Part 1A and 1B
Inherent Risk Justification of Answer Assertion and Ledger Audit Procedure/Task
Account(s) Impacted
Credit Risk
Based on the depictions of the annual report of CBA
Ltd. published in 2017, the risk factors for the bank
is observed where counter party may default in
adhering to the terms of agreement. These factors
include “unsteady income, low credit score,
employment type and collateral assets” (Li,
Simunic and Ye 2017).
The ledger accounts affected are
seen with public borrowings and
accounts considered with liabilities.
The audit process needs to
prevent the existence of such a
risk based on the increasing rate
of the borrower’s interest.
Liquidity Risk The risk factors are considered with lack of
investment which may take place in carrying out the
day-to-day cash transactions. There may be
significant risk factor pertaining to bank being
temporarily going out of cash. This particular
The primary implications on the
accounts have been discerned in
form of Tier 1 and Tier 2 Capital.
The conduction of the audit
procedure needs to ensure that
bank should be having
sufficient balance in cash in its
depository before handing

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consideration is associated liquidity risk of the bank
(Chen et al. 2016). over the excess cash.
Operational Risk
The operational risks have the potential for the
losses pertaining to human error. The resultant
impact is discerned with the potential losses in the
internal process. These risks are further seen with
legal risk excluding the reputation and strategic risk
(Contessotto and Moroney 2014).
The effect of this is able to consider
the ledger accounts inclusive of the
operating liabilities and assets along
with the necessary movements
available for selling of the
investments.
The process of audit needs to
considers monitoring of the
potential security breaches in
advance to prevent the aspects
of Human risk, process risk and
IT/system risk.
Competition and
disruption in
industry
The risk impact of this is considered with the
innovative solutions and the experiences of the
superior which are critical in maintaining the
appropriate relationship with the customers. The
customer expectation continues to evolve with
depicting the alternatives and deliver the
appropriate financial services along with the
emerging technologies. Failure of the recognition of
The main form of the impact of this
inherent risk is seen in the goodwill
account CBA Ltd.
The auditors of the company is
able to the aforementioned
problem by monitoring the
changes pertaining to the
customer preference,
technologies, products and
continuous improvement of the
market leading innovation and

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this standard is considered to pose a major threat to
the competitive forces in a timely manner which
may erode the earnings and market position in the
long term (Miran 2017). customer experiences.
Business
resilience
The resilience along with the continuity of the
operations is critical for the customers along with
the products, services and the relevant experiences.
The event of this is driven by the external
environment which is driven by the external
environment such as natural disasters, cyber-attacks,
politics, war and third-party suppliers (Ghosh and
Jarva 2016).
The risk and impact of the resilience
are seen in the anomaly in the
debtors account and third-party
suppliers accounts.
The monitoring of the health for
all the systems needs to be
planned as per the contingency
and planning and critical
systems and processes. The
company has taken several
initiatives with the investments
made in the agile automation,
capability and systems
resilience.
Data
Management
This consideration of the risk aspect is taken into
account with managing large volume of managing
The impact in the data management
is seen in all the relevant data
The auditors need assess the
capabilities, needs and

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the customer sensitive data. The technology aspect
continues to grow as a major cyber threat and
becoming more sophisticated with the increasing
third parties. The failure to keep this information
safe considered to be a major threat especially with
the regulators and customer’s expectations (Han et
al. 2015).
accounts which rely on IT system
security.
expectations of the evolving
customers, which will be able to
ensure potential for less data
breaches. In addition to this,
these needs to be active
engagement of the regulators for
giving the customers control on
their data, privacy and security.
People capability This risk factors are considered to be critical when it
comes to update the capabilities of the existing
people along with the emergence of new
technology.
The impact of this is seen in the
employers account.
The auditors need to assess the
new technologies on the
Australian economy and overall
business impact. The people
capability issues need to be
summarised as per the
identification of people
capability. This is further
required with the support of the

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key documenting issues as per
Transpower proposals for
“Regulatory Control Periods
(RCP)”. The audit initiative
should continue the
development initiatives with a
strong graduate programme
leading to workforce diversity.

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References
Chen, L.H., Chung, H.H., Peters, G.F. and Wynn, J.P., 2016. Does Incentive-Based
Compensation for Chief Internal Auditors Impact Objectivity? An External Audit Risk
Perspective. Auditing: A Journal of Practice & Theory, 36(2), pp.21-43.
Contessotto, C. and Moroney, R., 2014. The association between audit committee
effectiveness and audit risk. Accounting & Finance, 54(2), pp.393-418.
Ghosh, A.A. and Jarva, H., 2016. Does Regulation Enhance or Impair Audit Quality in
Banks?.
Han, S., Rezaee, Z., Xue, L. and Zhang, J.H., 2015. The association between information
technology investments and audit risk. Journal of Information Systems, 30(1), pp.93-116.
Li, Y., Simunic, D.A. and Ye, M., 2017. Do Auditors Care About Clients’ Compliance with
Environmental Regulations? Evidence from Environmental Risk and Audit Fees.
Miran, M., 2017. THE INFLUENCES OF ETHICAL COMPETENCY, AND AUDIT RISK
TOWARDS THE SKEPTISISME AUDITOR PROFESIONAL (The Empirical Study at
Public Accountant in Jakarta). Jurnal Manajemen dan Bisnis, 1(2).