Name

: Nadiatul Qalbi Amalia Rizqi

Student ID : 041911333077

Audit Risk
Risk : the acceptance by the auditors that there is some level of uncertainty in
performing the audit function.
a. Risk of Material Misstatement :
Risk that relate pervasively to the financial statements as a whole and
potentially affect a number of different transactions and account.

b. Risk of Material Misstatement at the assertion level :
- Inherent risk : represents the auditor’s assessment of the
susceptibility of an assertion to material misstatement, before considering the
effectiveness of client’s internal control.
- Control Risk : represent the auditor’s assessment of the risk that
a material misstatement could occur in an assertion and not be prevented or
detected on a timely basis by the client’s internal control.


Risk Assessment Procedure
Include the following :
1. Inquiries of management and others
2. Analytical Procedures
3. Observation and inspection
4. Discussion among engagement team members
5. Other risk assessment procedures

Considering Fraud Risk
The audit must be planned and performed with an attitude of professional
skepticism, consist of two components; a questioning mind and a critical
assessment of audit evidence.

Identification of Significant Risks
Significant Risk : represent an identifies and assessed risk of material
misstatement that in the auditor’s professional judgement, requires special audit
considerations.
Non-routine transactions :
- Transactions that are unusual, either due to size or nature and
that are infrequent in occurrence
- May increase the risk of material misstatement because they
often involve a greater extent of management intervention.

Matters that require significant judgment :
- Because include the development of accounting estimates for
which significant measurement uncertainly exists.
Fraud Risk :
- Involve concealment -> difficult to detect
- Auditor needs to consider sifgnificant risk which triggers
required responses to those risks
Audit Risk Model

PDR = AAR / (IR X CR)

PDR = Planned Detection Risk
AAR = Acceptable Audit Risk
IR = Inherent Risk
CR = Control Risk

PDR is the risk that audit evidence for an audit objective will fail to detect
misstatements exceeding performance materiality.

IR measures the auditor’s assessment of the susceptibility of an assertion to
material misstatement, before considering the effectiveness of related internal
controls.

CR measures the auditor’s assessment of the risk that a material misstatement
could occur in an assertion and not be prevented or detected on a timely basis by
client’s internal control.

AAR is a measure of how willing the auditor is to accept that the finansial
statement may be materially misstated after the audit is completed and an
unmodified opinion has been issued.