Relationships among audit risk components

There are some certain relationship among survey chance parts. For a destined level of audit peril, there is a converse connection between the sketched out levels of standard and control threats for a revelation and the level of hazard that the master can see for that demand.

In this way, the lower the evaluations of normal and control dangers, the higher is the pleasing level of zone peril.

Basic and control threats relate to the client's conditions, however exposure peril is controllable by the agent. As necessities be, the evaluator controls survey chance by changing insistence chance as shown by the delineated levels of characteristic and control dangers.

In relating the parts of audit risk, the analyst may express every territory in quantitative terms, for instance, rates, or non-quantitative terms, for instance, low, low, provoke, high, and generally extraordinary.

In either case, a vitality about the relationship passed on in the diagram chance model is fundamental in picking the panned sufficient level of perceiving check chance.

Relationship between test controls and assessing control risk

The connection between test controls and evaluating control hazard is that the arranged trial of controls are performed amid field work and ought to give proof of the correct and predictable use of a control approach or method all through the whole year under review. They are not normally performed under the essentially substantive approach.

However such tests are performed when, in light of great outcome from simultaneous trial of controls the inspector chooses to change from the fundamentally substantive to the lower surveyed level of control hazard approach, in this situation, the tests are some of the time called extra trial of control.

They are performed just when it is likely that extra confirmation will be gotten to bring down the underlying evaluation of control hazard and it is financially savvy to do as such.

These tests are likewise executed as a feature of an underlying lower surveyed level of control hazard procedure for particular attestation and they are performed to bolster the underlying arranged evaluated level of control danger of direct or low and the relating arranged level of substantive tests.

Importance of audit working papers

1. Working papers assist in the planning and performance of the audit.
2. Working papers provide assurance that the work delegated by the audit partner has been properly completed.
3. Working papers increase the economy, efficiency, and effectiveness of the audit.
4. Working papers contain sufficiently detailed and up-to-date facts which justify the reasonableness of the auditor’s conclusions.
5. Working papers retain a record of matters of continuing significance to future
6. The working papers enable the auditor to point out to the client the weakness of the internal control system in operation and inefficiency of the accountancy He may, therefore, be in a position to advise his client as to how to avoid such pitfalls.
7. He can know that his assistants had followed his instructions.

Designing audit tests of controls

Assessing control risk requires the auditor to consider the design of controls to evaluate whether they should be effective in meeting transaction-related audit objectives.


To use specific controls as a basis for reducing assessed control risk, however

Designing tests of controls involves the following:

1. Nature of tests
2. Timing of tests
3. Extent of tests