An Overview of the Auditing Process, The Risk-Based Audit Approach Essay

An Overview of the Auditing Process, The Risk-Based Audit Approach with in an AIS (Accounting culture System) - Essay ExampleThis paper not only outlines the basis for peril based ascend to canvassing only if in any case its implications for carrying out audit work in the context of accounting cultivation systems is discussed here below.Businesses typically identify the risks which are facing their operations and auditors can base their evidence collection and validation of information process on the measure outment of risks by businesses. Internal audit function of a business necessarily to ascertain the overall audit risk which refers to the likelihood of financial statements being misstated. The audit risk is a combination of three types of risks which are namely inherent risk, overcome risk and detection risk. Inherent risk implies the threat of material error or omission pertaining to an account or a class of transactions. simpleness risk covers the inability of the internal controls to detect and prevent material errors. Detection risk is the failure of audit procedures to unveil any material error, misstatement or even fraud in reporting. Both inherent and control risks determine the extent of detection risk. It is suggested that the higher the control risk is the lower is detection risk flummox by the auditors which may require greater substantive testing by them (Romney & Steinbart, 2005).The risk based approach allows assessing the weaknesses in the accounting information systems and controls over such systems for determining the nature, extent, scope and timing of audit procedures. This allows auditors to assess the threats and opportunities in order to deliver better opinion on the information processed by their clients. The audit procedures not only restrict to the information manually prepared by different businesses but also extend to the accounting informational systems which are maintained by companies for data recording and report ing (Romney & Steinbart, 2005).The