Mendoza, Jhomar G.

BSA-3A
Audit risk assessment is the procedures performed by the auditor to obtain an understanding of
the entity and its environment including its internal control and to assess the risks of material
misstatement in the Financial Statement. Audit risk is fundamental to audit process since the
auditors cannot or do not seek to review all the transactions without it. Auditor have used this
approach in order to minimize the chance of giving an inappropriate audit opinion, to make sure
the audit work is carried out efficiently and effectively. Audit risk assessment procedures
includes Inquiries of management and others within the entity, is that you are obtaining their
views about the risks of fraud and ask them on how to be addressed. the auditor should use
professional judgment in deciding when it is necessary to corroborate responses to inquiries with
other information. Next is Analytical Procedures is performed during the planning that may be
helpful in identifying the risk of material misstatement due to fraud. In performing analytical
procedures in planning the audit, the auditor creates expectations regarding plausible relationship
that are reasonably expected to exist. When those expectations are compared to recorded
amounts or ratios calculated from recorded amounts, the auditor should take those results into
account when determining the risk. Last is, observation and inspection on how to work their
control on their environment and performed and inspection if there are segregation of duties.
Inherent risk is a natural or already exist in the financial statement or the material misstatement
occur prior to the consideration of internal controls due to complexity of accounting treatments,
numbers of treatment and so on. When the inherent risk increases the auditor should make more
effective substantive procedure. Control Risk is the risk that a material misstatement due to error
or fraud will not be prevented, detected on a timely basis by the company’s internal control.
Detection risk, the auditor may not be able to detect the misstatements despite performing audit
procedures. There are Three main issues that the consider need to consider, first is Level of
assurance, when the level of assurance goes up or higher the substantive testing will also
increase. Next is when Level of susceptibility of the account for misstatement increases the
substantive testing will also increases. Last in when the Effectivity of internal control increases
the substantive testing will decrease.
Audit planning is not just easy as what you think, there are many procedures that needed to do.
As a student of Bachelor of Science in Accountancy, when doing an audit planning you must not
need to trust easily you must need to investigate, observe, inspect or gain many information that
may be sufficient to make an effective audit. Even though you have 20 years of experience on
doing auditing you must need to take it seriously, observe, inspect and investigate it clearly. Not
all the time the outline or our plans on doing the auditing will go smoothly. Sometimes, we
always need to change our plans on every audit we do. We always need to follow the standards
or the procedure in making an audit. Our guts will not tell us if there is a fraud or error in the
financial statements but if we do the procedure rightly, we may know if there is a fraud or error
in the financial statement, it is for the sake of the 100% audit or an effective audit. As an auditor
we need to act an independent, it will help us to be a great auditor also it will help us to provide a
100 % or effective audit.