Please explain the need to evaluate the inherent risk while designing the audit programme. Also if possible please provide a sitable example of the impact on financial statement.
1 Replies
(Guest)
inherent risk is the susceptibility that the material misstatement may affect the class of transaction and account balance assuming that there were no internal control.
The evaluation of inherent risk is necessary at the planning level for the audit procedures to be performed.
For example if we have to take Rs. 100000 from 20 persons than we will evaluate the inherent risk if it is low than we check the 4 or 5 persons out of 20. but if the inherent risk is more than the auditor will likely to check more persons.
Because if greater the inherent risk (low reliability on internal control) the greater the auditor will check the item (increase in sample size) or vice a versa.
Recent Topics
- Can i declare LTCG income as business income if I
- Stock entry in new software
- I have an EMI collection shop, what is its SAC cod
- Making payment once in quarter possible under QRMP
- Master File Documentation related
- Applicability of 44AD needs clarification
- ITC reversal in GST 3B
- Claim if ITC on stocks 19-2020 conversion from com
- Urgent doubt on GST
- Profit or Loss on Sale of Assets Accounting treatm
Related Threads
CAclubindia
