Talk:Audit risk/Archives/2012

contents

The "contents" of this page - Components of audit risk, Mathematics of audit risk and References - all refer to audit risk theory, rather than Audit risk. Suggest that these sections be removed from this page and included in a new page headed Audit risk theory. There should be a link to this new page from the Audit risk page. Jackson7 01:24, 26 October 2006 (UTC)

• This topic is very technical. To explain the term "audit risk" in detail requires pages and pages of explanation, which I think goes beoyond the idea behind wikpedia. The present explanation raises more questions than it answers. I suggest the following replacement:

Audit risk is a term that is commonly applied in relation to the audit of the financial statements of an entity. The primary objective of such an audit is to provide an opinion as to whether or not the financial statements present fairly the financial position and results of the entity. Audit risk is the risk of the auditor providing an inappropriate opinion on the financial statements. In other words, it is the risk of the auditor stating the financial statements present fairly the financial position of the entity, when in fact they do not.

A technical explanation of this term can be found in International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (http://www.ifac.org).

• All"probability" terms in this page must change :

In fact, audit risk is not a probability and audit standards did not talk about probability to establish audit risk concept. Some practitionneers attached probability to audit risk concept.

In fact, audit risk is a set of something.

- We can measure this set with probabilities if we consider this set, a set of events.

- We can measure this set with mass of evidence (beliefs functions)if we consider this set a set of audit-evidences.

- Finally, we can measure this set wtih fuzzy measures, if we consider this set as a linguistic assessement...

References :

- Srivastava R.P. & Shafer G.R. (1992) " Belief function Formula for audit risk " Review : Accounting Review, Vol. 67 n° 2, pp. 249-283, for evidence theory applied on audit risk.

- Lesage (1999)" Evaluation du risque d'audit : proposition d'un modele linguistique " Review : Comptabilite, Controle, Audit, Tome 5, Vol. 2, September 1999, pp.107-126, for fuzzy audit risk.

- Fendri-Kharrat et al. (2005)"Logique floue appliquee a l'inference du risque inherent en audit financier ", Review : RNTI : Revue des Nouvelles Technologies de l'Information, n° RNTI-E-5, (extraction des connaissances : etats et perspectives), November 2005, pp.37-49, Cepadues editions, for fuzzy inherent audit risk.

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I don't have my original SAS or AU documentation on hand, but what is the exact standard you are referring to? We can do this while staying true to the appropriate hierarchy. We can discuss the orignal standard and then move into interpretations. I do think that inherent risk, control risk, and detection risk need to be included. In fact, each needs a seperate page. There is no need for this article to be short. Audit risk lies at the core of auditing.--H.al-shawaf 04:23, 27 August 2006 (UTC)

Agree with most of above. However, think that on this page there should be a link to a new page entitled Audit risk theory and links from that page to inherent, control and detection risks. Jackson7 13:50, 25 October 2006 (UTC)

I can accept that solution.H.al-shawaf 22:36, 26 February 2007 (UTC)

Why don't we start at AU 312 and then work into some of the more major implications.--H.al-shawaf 02:05, 28 August 2006 (UTC)

If there is any reference to auditing standards, it should be to international standards, rather than the standards of one country. Jackson7 13:50, 25 October 2006 (UTC)

Why not reference both?H.al-shawaf 22:36, 26 February 2007 (UTC)

Capitalisation

I have moved Audit Risk to Audit risk (= audit risk) as it is not a proper noun. Although that is how audit risk is treated in the article, I think there are other capitalisations that need fixing - Inherent Risk etc. -- Beardo 03:34, 3 September 2006 (UTC)

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• • DETECTION RISK **

There are three components of the audit risk model: inherent risk, control risk, AND DETECTION RISK. The article needs to define detection risks. The article should also discuss the formula in more detail (i.e.: Audit Risk = IR * CR * DR)

detection risk

Agree. detection risk shouldn't be ignored. "movements" in the audit risk formula also important. For example, increasing audit work on X area could reduce detection risk, so overall audit risk would be reduced.--Tassieroy 17:34, 9 April 2007 (UTC)

It is mentioned that audit risk is the product of control risk and detection risk. By keeping control is constant the formula implies the audit is higher whenever the detection risk is high. It is not correct. Can any body explained the basis for the formula??? —Preceding unsigned comment added by 59.92.35.88 (talk) 01:47, 17 September 2007 (UTC)