Auditing Theory and Practice : Report

Auditing Theory and
Practice

Table of Contents
INTRODUCTION...........................................................................................................................1
Question 1...................................................................................................................................1
Question 2...................................................................................................................................1
CONCLUSION................................................................................................................................2

INTRODUCTION
Risk is major concern which has to be identified in order to make their business
operations in an effective manner. There are number of qualified professionals who are
specialised in identifying risk related problems and also tries to eliminate or limit them
effectively. However, there are certain things that are needed to be done. Coca-Cola firm has
procedurally ranked itself as a world leader in beverage industry (Sharma and Panigrahi, 2013).
Risk continue to be the high for the industry because, it is mainly depends on water scarcity and
pathetic quality impact production costs and capability, laws affect sales at particular point of
sales, and increasing labour rates and healthcare costs in Australia further weigh down on its
profits margin.
Question 1.
Audit risk is the risk under which auditor renders an inadequate opinion and views on the
financial statements. Some of the inadequate opinions are mentioned hereunder:
 Producing an unqualified audit report where a qualification is sufficiently reasonable;
 Producing a qualified audit views where no qualification is essential.
 Failing to emphasis an imperative matter under the audit report;
 Rendering an views on financial statements where nothing is provided due to a major
limitation of scope under the performance of the audit.
An audit risk s the combination of Inherent risk* Control risk* Identifies risk. This is the
risk which might considered as a good of different risks that might be encountered under the
audit performance. One of the component of Inherent risk is mentioned hereunder:
Inherent Risk: This is the risk of material misstatement under the financial statements accrues
because of error or omission as a outcome of factors instead of failure of controls. This is
presumed to the higher at the time of higher degree of judgement and prediction involved or
where transactions of the firm is extremely complicated (Healy and Palepu, 2012). For instance,
Inherent risk under the audit of newly incorporated financial institution that has a major trade
and exposure under the complicated derivative instruments might be adopted to be majorly
higher as highly compared to the audit of a well incorporated to the audit of a most renowned
producing concern operating in a stable competitive environment.
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