Question

Explain the four steps of the risk-based audit approach, and discuss how they apply to the overall security by taking a sample Saudi Company as a case study.

accounting Information System

Answer 1

Risk based audit approach:

It is meant and implemented by the auditor to attend core points related to the nature,timing and extent of the procedures where there are high chances of material mis-statement.

This is undertaken to focus on such areas where there are high chances of mis-statement possible.The audit assignments differ from due to the different nature.

Performing risk based audit approach will help the auditor to focus on such areas to a large extent.

This mainly focus on analysis and management of the risk during the process of audit.

SA 315 and SA 330 focus on this approach.

The four steps involved in this are:

a.To undertake the risk based audit approach the auditor needs to understand the entity and the working and environment,controls.There should be an understanding of the controls of the entity by the auditor.

b.After gaining an understanding of the environment the auditor needs to assess the areas where there are chances of material misstatement.The auditor needs to assess the environment and needs to make required changes to accomodate to the changes in the audit process. After the plan is executed the auditor will make changes in the audit plan.

c.After performing the risk assessment the auditor needs to collect all the evidence and record his response according to the response gained from the above two steps.

d.The final step in this process is evaluate whether audit plan undertaken has produced audit evidence that are sufficient and appropriate and have provided the desired results.