Assessing Materiality and Risk Simulation 1 Assessing Materiality and Risk Simulation Acc 491 Assessing materiality and risk simulation Auditors are under time restrictions when performing an audit because of this there is Assessing Materiality and Risk Simulation 2 only time to audit three accounts 100 The accounts that are chosen are the ones that would be the most important to financial statement users and may include cash lines of credit and intangibles The other accounts that are looked at are only sampled usually due to the high volume of transactions in these accounts these accounts would include accounts payable and inventory Because the other accounts are only sampled there is a materiality figure associated with these This is the amount of misstatement that may be tolerated and not make a big impact on the overall statements of the company The other accounts that are 100 audited do not need a materiality figure associated with them because of the thorough audit of the account The next step is for the auditor to determine the audit risk This includes inherent risk control risk and detection risk The only factor under the auditors control is the detection risk The others are affected by the company and how the transactions are accounted for The detection is risk is what the auditor will detect while performing the audit All of these factors go together as they make up the entirety of the audit risk and help the auditor to determine what should be looked at more closely References Assessing Materiality and Risk Simulation 3 University of Phoenix 2006 Auditing and the Public Accounting Profession Integrity of Financial Reporting Retrieved from University of Phoenix Acc491 website
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