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eFishie eFishie
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5 years ago
A) Discuss what is meant by the term "control environment" and identify four control environment subcomponents that the auditor should consider.

B) List the steps that management follows in assessing risks relevant to the preparation of financial statements in conformity with an applicable financial reporting framework.

C) How does the auditor obtain knowledge about management's risk assessment process?

D) Explain how management's risk assessment process differs from the auditor's risk assessment process.

E) What is the relationship between management's risk assessment process and audit evidence?
Textbook 

Auditing: The Art and Science of Assurance Engagements, Canadian Edition


Edition: 12th
Authors:
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charleshardtcharleshardt
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5 years ago
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More questions for this book are available here
A) The control environment consists of the actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about control and its importance to the entity. Subcomponents include:
1. Active integrity and promotion of ethical values
2. Commitment to competence
3. The board of directors and audit committee
4. Management philosophy and operating style
5. Organizational structure
6. Human resource policies and practices
7. Methods of assigning authority and responsibility
8. Management control methods
9. Systems development methodology
10. Management reaction to external influences
11. Internal audit
B) Management's steps include:
∙ Identify factors that may increase risk.
∙ Estimate the significance of risks.
∙ Assess the likelihood that risks would occur.
∙ Develop specific actions that need to be taken to reduce the risk to an acceptable level.
C) The auditor:
∙ Determines how management identifies risk relevant to financial reporting
∙ Evaluates the significance of these risks
∙ Evaluates the likelihood of the risks occurring
∙ Decides whether actions (not already undertaken by management) are needed to address the risks
Questionnaries and discussions with management are the most common ways to obtain this understanding.
D) Management's risk assessment process is focused upon the identification and analysis of risks relevant to the preparation of financial statements in conformity with an applicable financial reporting framework. Management assesses risks as a part of designing and operating internal controls to minimize errors and fraud.
Auditors assess risks to decide the evidence needed in the audit.

E) There is an inverse relationship: if management effectively assesses and responds to risks, the auditor will typically accumulate less evidence than when management fails to identify or respond to significant risks.
This verified answer contains over 290 words.
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eFishie Author
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5 years ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
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this is exactly what I needed
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Just got PERFECT on my quiz
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