In Practice, Auditors Rarely Assign Numerical Probabilities to Inherent Risk

question 21

Essay

In practice, auditors rarely assign numerical probabilities to inherent risk, control risk, or acceptable audit risk.It is more common to assess these risks as high, medium, or low.For each of the four situations below, fill in the blanks for planned detection risk and the amount of evidence you would plan to gather ("planned evidence")using the terms high, medium, or low.

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Definitions:

Balance Per Bank

The amount of money a company's records show in its bank account, often reconciled with the bank's records for accuracy.

Balance Per Books

The amount shown in a company's accounting records, as opposed to the actual cash balance or balance reported by a bank.

Cash Disbursement Transactions

Financial activities involving the payment of cash from a business to vendors, employees, or other entities.