Accounts Receivable and Acceptable Audit Risk Essay Sample

1. Explain why determinations about acceptable audit hazard. built-in hazard. the preliminary opinion about materiality. and public presentation materiality should be made early in the audit during the planning stage. The intent of measuring hazards early is to assist hearer program the audit by make up one’s minding which parts of the audit to stress and the extent of proving. It helps hearers to understand the nature. timing. extent of the histories. therefore program a right process and the appropriate grounds to roll up

2. Explain how the degrees of acceptable audit hazard and materiality you selected in this assignment might impact the balance of the audit. Specifically. what consequence would take down degrees of acceptable audit hazard and materiality have on the audit compared to the degrees you selected? The degrees of acceptable audit hazard make up one’s mind how much grounds to garner during the audit. Lower degrees of acceptable audit hazard means less tolerant of the misstatement. and hence more substantial trials will necessitate to be done. A low acceptable audit hazard requires a high degree of audit confidence. but more clip. labour and cost are required. For the histories are high hazardous. such as those with comparatively big size and easy to hold mistakes. a low degree of materiality will take to a over audit. Hearers will roll up more grounds than needed to scrutinize the histories. For the histories that are expensive to garnering grounds. such behaviour will increase the audit cost.

3. In demand ( f ) of this assignment. you established public presentation materiality for each of several balance sheet histories. Explain/justify how you take your public presentation materiality sums for each of the undermentioned histories: ( a ) accounts receivable. ( B ) allowance for bad debts. ( degree Celsius ) accounts collectible. ( a ) Accounts Receivable is comparatively hazardous by nature. and the sum is big. It is easy to pull strings and dearly-won to acquire verification. so the degree of materiality should be set higher. As for Oceanview. the size and materiality of the histories of Cash and Accounts Receivable are similar. so we apply the public presentation materiality degree of Cash to Accounts Receivable. ( B ) ADA history is every bit hazardous as Histories Receivable. nevertheless the size is well lower and easy to be recalculated. So we set a low degree of materiality for ADA history.

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