Risk based auditing internal and external audit

General Objective: The general objective of the Risk based auditing internal and external audit is to provide auditors with a structured framework to assess and manage audit risk effectively during the audit process. It helps auditors make informed decisions about the nature, timing, and extent of audit procedures to reduce audit risk to an acceptable level.

Sub-Objectives:

1. Understanding Audit Risk:
• Define and explain the concept of audit risk.
• Recognize the inherent uncertainty and complexity in financial statement audits.
2. Components of Audit Risk:
• Identify and understand the three components of audit risk: inherent risk, control risk, and detection risk.
• Explore how these components interact to determine the overall audit risk.
3. Assessing Inherent Risk:
• Learn how to assess inherent risk by evaluating the nature of the entity's business, industry, and external factors.
• Understand how management's judgments and estimates can affect inherent risk.
4. Evaluating Control Risk:
• Examine the entity's internal controls and their design and effectiveness.
• Determine the level of reliance that can be placed on internal controls to reduce detection risk.
5. Managing Detection Risk:
• Understand how detection risk is the risk that audit procedures will not detect a material misstatement.
• Plan audit procedures to manage detection risk, considering the assessed inherent and control risks.
6. Integration of Components:
• Explore how auditors integrate the assessments of inherent risk, control risk, and detection risk to determine the acceptable level of overall audit risk.
7. Materiality and Audit Risk:
• Discuss the relationship between materiality and audit risk.
• Determine how materiality thresholds influence the audit procedures and reporting.

Course Outline:

A comprehensive course on the Risk based auditing internal and external audit may include the following topics:

1. Introduction to Audit Risk:
• Overview of audit risk and its significance in the audit process.
2. Components of Audit Risk:
• Detailed explanation of inherent risk, control risk, and detection risk.
3. Assessing Inherent Risk:
• Factors influencing inherent risk.
• Assessing inherent risk based on industry and entity-specific factors.
4. Evaluating Control Risk:
• Understanding internal controls and their role in managing risk.
• Assessing control risk and reliance on controls.
5. Detection Risk and Audit Procedures:
• Detection risk and its relationship with the nature, timing, and extent of audit procedures.
• Planning and executing audit procedures to manage detection risk.
6. Integration of Components:
• Bringing together assessments of inherent risk, control risk, and detection risk.
• Determining the overall audit risk.