01-25-2006, 10:50 PM
01-26-2006, 12:37 AM
dont have a clue if it is used in a phrase!
Cheers
Cheers
01-26-2006, 12:45 AM
same as more than less
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madnan_arshad@hotmail.com
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madnan_arshad@hotmail.com
02-01-2006, 10:42 PM
what does it means in audit standard
02-24-2010, 12:41 AM
Assalam o Alaikum...
I think the question has been asked in context of "Assurance Level"
As in an audit engagement, there is a high level of assurance which is referred to as Reasonable Assurance, while a lower level of assurance in given in Review Engagement which is referred to as Moderate Assurance.
Hence, high and low assurance here means the degree of reliability on the report, in simple words. Audit report is highly reliable than review report.
I think the question has been asked in context of "Assurance Level"
As in an audit engagement, there is a high level of assurance which is referred to as Reasonable Assurance, while a lower level of assurance in given in Review Engagement which is referred to as Moderate Assurance.
Hence, high and low assurance here means the degree of reliability on the report, in simple words. Audit report is highly reliable than review report.
02-24-2010, 02:25 PM
Hi Madeeha,
Before I explore technical details of the phrase in question, I presume that you have thorough understanding of components of control environment, internal controls, test of controls, substantive testing, inherent risk, control risk, detection, risk (Audit Risk).
The auditor assesses the risks of material misstatement (whether caused by error or fraud) in a financial statement audit, and designs and performs audit procedures whose nature, timing, and extent are responsive to the assessed risks.
The auditor should obtain an understanding of the five components of internal control sufficient to assess the risk of material misstatement of the financial statements, and to design the nature, timing, and extent of further audit procedures. The auditor should obtain a sufficient understanding by performing risk assessment procedures to evaluate the design of controls relevant to an audit of financial statements and to determine whether they have been implemented. An understanding of internal control involves considering whether controls, individually or in combination with other controls, are capable of effectively preventing or detecting and correcting material misstatements.
It is not necessary to assess all controls in connection with assessing the risks of material misstatement and designing and performing further audit procedures in response to assessed risks. It is a matter of the auditorâs professional judgment as to the controls or combination of controls that should be assessed. However, for significant risks, to the extent the auditor has not already done so, the auditor should evaluate the design of the entityâs related controls, including relevant control activities, and determine whether they have been implemented.
When the auditor believes, based on the understanding of controls, that controls are capable of effectively preventing or detecting and correcting material misstatements, the auditor may initially assess control risk at less than maximum (LESS THAN HIGH) during the risk assessment phase of the audit. This initial assessment of control risk is subject to the satisfactory results of the tests of the operating effectiveness of those controls (test of Controls) to support that control risk assessment. Whether an auditor initially assesses control risk at less than maximum (LESS THAN HIGH), and the degree thereof, is a matter of professional judgment.
In contrast, when the auditor believes, based on the understanding of controls, that controls are not capable of preventing or detecting and correcting material misstatements, the auditor would assess control risk as maximum (MORE THAN HIGH), and the auditor would plan and perform substantive procedures to appropriately respond to the identified risks. In this situation, the auditor may identify missing or ineffective controls. The auditor must evaluate identified control deficiencies and determine whether these deficiencies, individually or in combination, are significant deficiencies or material weaknesses. Control deficiencies identified during the audit that upon evaluation are considered significant deficiencies or material weaknesses under this section must be communicated in writing to management and those charged with governance. Also, in this circumstance, the auditor needs to be satisfied that performing substantive procedures alone would enable the auditor to design and perform an appropriate audit strategy and provide sufficient appropriate audit evidence to support his or her audit opinion.
In plain English, the auditor makes his initial assessment of audit risk by evaluating entityâs design of controls and their effectiveness. Based on this evaluation auditor, decides whether the risk of material misstatement is higher or lower. If the controls are well designed, effective, and operating as desired, the auditor says risk of material misstatement is less than maximum (LESS THAN HIGH) and vice versa.
I hope you now understand the term very well. However, please let me know if you have any further query in this regard.
GREAT KHANS
Before I explore technical details of the phrase in question, I presume that you have thorough understanding of components of control environment, internal controls, test of controls, substantive testing, inherent risk, control risk, detection, risk (Audit Risk).
The auditor assesses the risks of material misstatement (whether caused by error or fraud) in a financial statement audit, and designs and performs audit procedures whose nature, timing, and extent are responsive to the assessed risks.
The auditor should obtain an understanding of the five components of internal control sufficient to assess the risk of material misstatement of the financial statements, and to design the nature, timing, and extent of further audit procedures. The auditor should obtain a sufficient understanding by performing risk assessment procedures to evaluate the design of controls relevant to an audit of financial statements and to determine whether they have been implemented. An understanding of internal control involves considering whether controls, individually or in combination with other controls, are capable of effectively preventing or detecting and correcting material misstatements.
It is not necessary to assess all controls in connection with assessing the risks of material misstatement and designing and performing further audit procedures in response to assessed risks. It is a matter of the auditorâs professional judgment as to the controls or combination of controls that should be assessed. However, for significant risks, to the extent the auditor has not already done so, the auditor should evaluate the design of the entityâs related controls, including relevant control activities, and determine whether they have been implemented.
When the auditor believes, based on the understanding of controls, that controls are capable of effectively preventing or detecting and correcting material misstatements, the auditor may initially assess control risk at less than maximum (LESS THAN HIGH) during the risk assessment phase of the audit. This initial assessment of control risk is subject to the satisfactory results of the tests of the operating effectiveness of those controls (test of Controls) to support that control risk assessment. Whether an auditor initially assesses control risk at less than maximum (LESS THAN HIGH), and the degree thereof, is a matter of professional judgment.
In contrast, when the auditor believes, based on the understanding of controls, that controls are not capable of preventing or detecting and correcting material misstatements, the auditor would assess control risk as maximum (MORE THAN HIGH), and the auditor would plan and perform substantive procedures to appropriately respond to the identified risks. In this situation, the auditor may identify missing or ineffective controls. The auditor must evaluate identified control deficiencies and determine whether these deficiencies, individually or in combination, are significant deficiencies or material weaknesses. Control deficiencies identified during the audit that upon evaluation are considered significant deficiencies or material weaknesses under this section must be communicated in writing to management and those charged with governance. Also, in this circumstance, the auditor needs to be satisfied that performing substantive procedures alone would enable the auditor to design and perform an appropriate audit strategy and provide sufficient appropriate audit evidence to support his or her audit opinion.
In plain English, the auditor makes his initial assessment of audit risk by evaluating entityâs design of controls and their effectiveness. Based on this evaluation auditor, decides whether the risk of material misstatement is higher or lower. If the controls are well designed, effective, and operating as desired, the auditor says risk of material misstatement is less than maximum (LESS THAN HIGH) and vice versa.
I hope you now understand the term very well. However, please let me know if you have any further query in this regard.
GREAT KHANS
02-24-2010, 03:18 PM
That was quite helpful. Nice explanation. I don't think Madeeha will reply to it now though. She might have left this forum by now
02-24-2010, 04:04 PM
Hi Dard,
I knew that the post is very old and was recently readdressed by Nabeel. I used her name intentionally because she raised this question. My audience are those students who are confused on this topic, as I noticed in my teaching experience.
I do acknowledge your appreciation.
Regards,
GREAT KHANS
I knew that the post is very old and was recently readdressed by Nabeel. I used her name intentionally because she raised this question. My audience are those students who are confused on this topic, as I noticed in my teaching experience.
I do acknowledge your appreciation.
Regards,
GREAT KHANS