Audit Risk Model: Key Concepts and Formulas for Auditing Process

Question 1

What is the systematic process of accumulating & evaluating evidence to assess the degree of correspondence?

Accepted Answer

Audit Planning

Question 2

What are the reasons for auditing in the acceptance of an audit client?

Accepted Answer

To comply with regulations

Question 3

What is the key document that outlines the terms of the audit engagement?

Accepted Answer

Engagement letter

Question 4

Which phase of the audit process involves understanding the entity's environment and assessing internal control?

Accepted Answer

Audit Opinion

Question 5

What does DR stand for in the Audit Risk Model formula?

Accepted Answer

Detection Risk

Question 6

In the Audit Risk Model formula, what does IR stand for?

Accepted Answer

Inherent Risk

Question 7

What is the formula for the Audit Risk Model?

Accepted Answer

DR = AAR / (IR x CR)

Question 8

What is the main focus of the Planning phase in the audit process?

Accepted Answer

Assessment of risk of material misstatement

Question 9

What is the applicable financial reporting framework that can be used in the audit process?

Accepted Answer

IFRS

Question 10

What is the accepted audit risk in the Audit Risk Model?

Accepted Answer

Audit Opinion