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Many Auditors Take an Approach to Assessing the Risk of Material

question 49

Essay

Many auditors take an approach to assessing the risk of material misstatement by beginning with an assessment of business risks.
a.Define business risks.
b.Why have auditors found it effective to take the approach of assessing business risks?
c.Identify a business risk and explain how it might affect the auditor's audit procedures.


Definitions:

Net Pay

The amount of money that an employee takes home after all deductions, such as taxes and retirement contributions, have been subtracted from the gross salary.

FICA Tax

A U.S. federal tax that funds Social Security and Medicare, deducted from employees' paychecks and matched by employers.

Federal Income Tax

The tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

Form 941

A tax form filed by employers in the United States to report withholding taxes, Social Security, and Medicare taxes.

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