Exam 7: Assessing Risks and Internal Control

Generally accepted auditing standards permit auditors to place complete reliance on internal control (zero control risk assessment) to justify the exclusion of substantive audit procedures for a balance sheet or income statement account.

Since management is most familiar with an organization, they should sit on the Board of Directors and advise those charged with governance of the organization.

Discuss four ways of managing risk in an organization.

Detection risk is the probability that audit procedures will produce evidence of material misstatements.

What is the definition of business risk?