Inherent Risk and Control Risk Assessments: Evidence on the Effect of Pervasive and Specific Risk Factors

2000 ◽  
Vol 19 (2) ◽  
pp. 119-131 ◽  
Author(s):  
William F. Messier ◽  
Lizabeth A. Austen
Keyword(s):  
Risk Factors ◽  
Risk Model ◽  
Positive Association ◽  
Risk Assessments ◽  
Significant Positive Association ◽  
Audit Risk ◽  
Inherent Risk ◽  
Specific Risk ◽  
And Control ◽  
Control Risk

This paper reports on a study that examines the effect of pervasive and specific risk factors on auditors' inherent risk and control risk assessments in an experimental setting. Two hypotheses concerning the significance of inherent and control risk factors on auditors' inherent risk (IR) and control risk (CR) assessments were tested by having 124 senior auditors and managers provide risk assessments on eight cases. The results show that the pervasive and specific risk factors included in the experiment were significant to both the auditors' IR and CR assessments. For the case used in this study, there was a significant positive association between auditors' IR and CR assessments. Taken together, these findings are consistent with Waller's (1993) notion of a knowledge-based dependency between IR and CR assessments. The findings are not consistent with Kinney's (1989) reformulation of the (IR×CR) component of the audit risk model.

Misstatements in Financial Statements: The Relationship between Inherent and Control Risk Factors and Audit Adjustments

2014 ◽  
Vol 33 (4) ◽  
pp. 247-269 ◽  
Author(s):  
Klaus Ruhnke ◽  
Martin Schmidt
Keyword(s):  
Risk Factors ◽  
Internal Control ◽  
Risk Model ◽  
Relative Magnitude ◽  
Level Control ◽  
Audit Risk ◽  
Big 4 ◽  
Audit Risk Model ◽  
And Control ◽  
Control Risk

SUMMARY: This paper analyzes whether audit adjustments vary systematically with inherent and control risk factors. The analysis is based on proprietary data from a large recent sample of audit adjustments detected in the financial statement audits conducted by a Big 4 audit firm in Germany. We extend the scope of prior studies by incorporating client-specific planning materiality in our design, enabling us to analyze the relative magnitude of adjustments. Our findings show that audit adjustments vary systematically, as proposed by the audit risk model. Specifically, the integrity and competence of the client's management, economic position, entity-level control strength, and internal control system are associated with the number and relative magnitude of audit adjustments. The results also suggest that inherent and control risk factors are particularly strongly associated with income-affecting adjustments. JEL Classifications: M40, M41, M42.

scholarly journals Considerations Relating to Specific Inherent Risk and Control Risk

2020 ◽  
Vol 26 (0) ◽  
pp. 200-207
Author(s):  
Florin Ioan SCORȚESCU ◽  
Keyword(s):  
Financial Statements ◽  
Audit Risk ◽  
Inherent Risk ◽  
Specific Risk ◽  
And Control ◽  
The Way ◽  
Control Risk

Audit risk (Ra) occurs if financial statements belonging to the firm are majorly distorted, in which case an auditor may give a defective opinion on them. This risk depends on the risk of significant distortion (Rds) and on the risk of detection (Rd). The risk of significant distortion (Rds) takes into account the inherent risk (Ri) and the control risk (Rc). The balance of an account or more transactions may have majorly distorted values, with these falling within the scope of the inherent risk. It is in turn structured in general risk and specific risk. The concept of specific risk is apparent from aspects which take into account the practice previously acquired by the auditor and the way in which the auditor is aware of the audit areas. Assessment of the specific inherent risk and control risk shall be carried out in the following.

Audit Risk Assessment and Influence on the Auditor`s Opinion

2021 ◽  
Vol 19 (163) ◽  
pp. 528-543
Author(s):  
Maria GROSU ◽  
◽  
Camelia Catalina MIHALCIUC ◽  
◽  
Keyword(s):  
Risk Factors ◽  
Stock Exchange ◽  
Risk Control ◽  
Financial Statements ◽  
Accurate Identification ◽  
Cross Sectional ◽  
Audit Risk ◽  
Inherent Risk ◽  
Three Components ◽  
Control Risk

Risk is one of the most controversial elements that auditors face in audit missions. This refers to the probability that significant misstatements will exist in the financial statements of companies, and the auditor will issue an unqualified opinion, therefore an erroneous opinion. For the auditor, the audit risk can be considered an economic risk, which requires the professional accountant to try to minimize this risk. Accurate identification and evaluation of the risk factors that characterize the three components of the Audit Risk - Inherent Risk, Control Risk and Detection Risk - contribute to a rigorous planning of the audit approach. In other words, the identified risks will be the basis for orienting the auditor's efforts towards those areas where distortions can lead to the alteration of the true image reported by the users' financial statements. In this study are identified and prioritized, based on financial reports in general, and of the audit, in particular the risk factors that characterize Audit Risk on three components: Inherent Risk, Control Risk and Detection Risk. The sample studied is represented by companies listed on the Bucharest Stock Exchange on the regulated market, and the cause-effect analysis, but also cross-sectional analysis takes into account the period 2019-2020, before the crisis caused by Covid-19 and year of installation of the crisis. By testing and validating research hypotheses using regression methods and multivariate data analysis, it is highlighted that a ranking of audit risk components can be made, the inherent risk having a greater influence on audit planning than control risks and detection risks. Also, at the level of the analyzed sample, a company profile is identified, depending on the object of activity, auditor, the size of the audit risk and the opinion formulated in the audit report for the financial year closed at the end of 2020.

Decision Processes in Audit Evidential Planning: A Multistage Investigation

2000 ◽  
Vol 19 (1) ◽  
pp. 123-143 ◽  
Author(s):  
Arnold M. Wright ◽  
Jean C. Bedard
Keyword(s):  
Risk Factors ◽  
Program Effectiveness ◽  
Planning Process ◽  
Risk Model ◽  
Decision Processes ◽  
Audit Risk ◽  
Planning Stage ◽  
Inherent Risk ◽  
Client Risk ◽  
Audit Program

This paper reports the results of a verbal protocol study designed to assess how variation in inherent-risk factors affects auditors' decision processes throughout audit planning, including the tasks of risk assessment, generation of hypotheses, and development and justification of audit programs. The audit risk model prescribes that audit program plans should be designed to respond to client risk factors. Auditors should be able to identify potential errors that may occur given the risks present and design program plans to test for the presence of these errors. Client inherent-risk factors were varied between subjects to create high- and low-risk conditions and a seeded error enabled assessment of effectiveness in hypothesis generation and audit test planning. We find that client risk factors have pervasive effects throughout planning, affecting the concentration on error hypotheses, audit program effectiveness, and justification for audit tests. However, risk factors were not associated with differences in extent of testing or with justification of extent decisions. Our findings also suggest that recognition of risk factors may provide a stimulus to auditors with less experience to improve performance in the planning process. These results highlight the importance of identifying and communicating client risk factors to all audit team members in the planning stage.

Design and Application Research of Audit Risk Control Program

2013 ◽  
Vol 310 ◽  
pp. 718-721
Author(s):  
Li Ya Ma ◽  
Shu Feng Wang
Keyword(s):  
Risk Model ◽  
Risk Control ◽  
Control Program ◽  
Audit Report ◽  
Audit Risk ◽  
Specific Content ◽  
Auditing Standards ◽  
Audit Reports ◽  
Independent Auditing ◽  
And Control

Strict procedures for prevention and control of audit risk is one of the most effective measures, so the research on design of audit risk control standardization program has very great practical application value. Combined with the research needs, the CPA practices respectively utilize means of summarizing method, for example, analysis method and enumeration method. The CPA practice also revealing the audit risk and audit report risk associated with different basis, combining with the traditional audit risk model. The specific content concludes the report of audit risk and then designs including audit reports preparation, audit draft, final review report to track a feedback of visit to the control standard operating requirements, and then puts forward the independent auditing standards. The auditing standards should be added to the proposal of audit report program.

Reducing risk in equine anaesthesia part 2: specific risk factors, human factors and safety checklists

UK-Vet Equine ◽  
2019 ◽  
Vol 3 (4) ◽  
pp. 138-145
Author(s):  
Kate R Loomes
Keyword(s):  
Risk Factors ◽  
Patient Safety ◽  
Human Factors ◽  
General Anaesthesia ◽  
Human Error ◽  
Inherent Risk ◽  
Specific Risk ◽  
Risk Knowledge

Performing general anaesthesia in horses carries an inherent risk. Knowledge of the physiological, pharmacological and practical considerations unique to horses is important to be able to minimise this risk and to address complications should they arise. This article discusses the physiological considerations of subsets of the equine population; aspects of human and patient safety; and methods to reduce human error.

scholarly journals Clustering of lifestyle risk factors among Algerian adolescents: Comparison between urban and rural area

2021 ◽  
Author(s):  
Fatima alzahra Hasan Yakti ◽  
Hissa Al-Mannai ◽  
Dana Saad ◽  
Abdelhamid Kerkadi ◽  
Grace Attieh ◽  
...  
Keyword(s):  
Risk Factors ◽  
Urban Area ◽  
Rural Area ◽  
Physical Inactivity ◽  
Fruits And Vegetables ◽  
Positive Association ◽  
Negative Association ◽  
Design Data ◽  
Significant Positive Association ◽  
Cross Sectional

Background: Lifestyle behavior risk factors (LBRs) such as sedentary behavior, physical inactivity, smoking, unhealthy eating patterns and being overweight/obese play a major role in the development or prevention of NCDs. Objective: Compare the clustering of LBRs between urban and rural Algerian adolescents. We expect differences in LBRs between urban and rural area. Design: Data of this cross-sectional study was derived from GSHS. Self-administered, anonymous questionnaire was filled out by 4532 adolescents (11–16 years), which addressed LBRs of NCDs. LBRs clustering was measured by the ratios of observed (O) and expected (E) prevalence of one or more simultaneously occurring LBRs for urban and rural area separately. Multivariate logistic regression was performed to examine the association of LBRs as dependent variable with demographic variables (location, age, gender). Results: The most common LBR was physical inactivity (84.6%: 50.9% for urban and 49.1% for rural). Adolescents in urban area had a higher prevalence of two (56.8% vs. 43.2%) and three and more (61.3 vs. 38.7%) LBRs than rural. In urban area, a significant positive association was found between: (low fruits and vegetables + physical inactivity) [2.06 (1.61-2.64)] and (high SB + smoking) [2.10 (1.54-2.76)], while (physical inactivity + high SB) [0.70 (0.54-0.91)] showed a significant negative association. In rural area, (high SB + overweight/obesity) [1.49 (1.09-2.04)] had a significant positive association. While, (low fruits and vegetables + high SB) [0.75 (0.60-0.94)], (physical inactivity + high SB) [0.65 (0.49-0.86)] and (physical inactivity + smoking) [0.70 (0.49-0.99)] had a negative association. Conclusions: Several socio-demographic factors have been identified to play a role in LBRs clustering among Algerian adolescents. Results of the study suggest the development of intervention aiming to tackle different LBRs rather than focusing on a single LBR.

scholarly journals Development of a risk scoring system for prognostication in HIV-related toxoplasma encephalitis

2020 ◽  
Author(s):  
Yao Li ◽  
Yanming Zeng ◽  
Min Liu ◽  
Yanqiu Lu ◽  
Xueyan Liu ◽  
...  
Keyword(s):  
Risk Factors ◽  
Scoring System ◽  
Risk Model ◽  
Therapeutic Interventions ◽  
Scoring Model ◽  
Cell Counts ◽  
Toxoplasma Encephalitis ◽  
Specific Risk ◽  
Risk Scoring ◽  
Risk Scoring System

Abstract Objective: This study aims to evaluate specific risk factors influencing prognosis of HIV-infected patients with toxoplasma encephalitis (TE) in order to develop a prognostic risk scoring system for them. Methods: This is a six-center retrospective study of hospitalized HIV/TE patients. Data including six-week mortality after diagnosis, baseline characteristics, clinical features, laboratory tests and radiological characteristics of eligible patients were assimilated for risk model establishing.Results: In this study, the six-week mortality among 94 retrospective cases was 11.7% (11/94). Seven specific risk factors, viz. time from symptom onset to presentation, fever, dizziness, CD4+ T-cell counts, memory deficits, patchy brain lesions, and disorders of consciousness were calculated to be statistically associated with mortality. A criterion value of ‘9’ was selected as the optimal cut-off value of the established model. The AUC of the ROC curve of this scoring model was 0.976 (p<0.001). The sensitivity and specificity of the risk scoring model was 100.0% and 86.9%, respectively, which were 81.8% and 94.1% of this scoring model in the verification cohort, respectively. Conclusions: The developed scoring system was established with simple risk factors, which also allows expeditious implementation of accurate prognostication, and appropriate therapeutic interventions in HIV-infected patients with TE.

The Audit Risk Model: An Empirical Test for Conditional Dependencies among Assessed Component Risks

2000 ◽  
Vol 19 (2) ◽  
pp. 105-117 ◽  
Author(s):  
Richard B. Dusenbury ◽  
Jane L. Reimers ◽  
Stephen W. Wheeler
Keyword(s):  
Risk Model ◽  
Empirical Test ◽  
Explanatory Power ◽  
Risk Assessments ◽  
Theoretical Research ◽  
Future Research ◽  
Linear Modeling ◽  
Audit Risk ◽  
Modeling Process ◽  
Audit Risk Model

Professional standards and prior theoretical research indicate that assessed audit risk components should be conditionally dependent. In an experiment, experienced auditors made the risk assessments that are, in practice, inputs for using the audit risk model for planning the extent of detailed testing. Conditional dependencies were tested using a sequential linear modeling process that added the previously assessed risk components to the model (e.g., inherent risk assessments added to predict subsequent control risk assessments) as the last independent variable. Results showed that the previously assessed risk substantially increased the explanatory power of the models in accounting for variation in the subsequently assessed components. The results support the notion that audit risk components are assessed conditionally. Thus, they provide a defense for practitioners' claims that they are appropriately using the model and give guidance to future research on the audit risk model.

Are Audit Program Plans Risk-Adjusted?

1999 ◽  
Vol 18 (1) ◽  
pp. 55-74 ◽  
Author(s):  
Theodore J. Mock ◽  
Arnold M. Wright
Keyword(s):  
Risk Model ◽  
Experimental Studies ◽  
Strong Relationship ◽  
Audit Risk ◽  
Accounts Receivable ◽  
Inherent Risk ◽  
Audit Risk Model ◽  
Broad Array ◽  
Audit Program ◽  
And Training

Prior archival and experimental studies provide conflicting results regarding the extent to which audit program plans are responsive to client risks, as prescribed by the Audit Risk Model. The purpose of this study is to corroborate and extend archival research on this issue by considering a broader set of client risks and incorporating a number of methodological improvements. Data were gathered on risk assessments and evidential plans in the accounts receivable area from the working papers of 74 randomly selected manufacturing clients (42 general manufacturing and 32 high-technology manufacturing). The results indicate a statistical association between the level of and changes in a limited number of assessed client risks (e.g., management aggressiveness and the inherent risk of an existence misstatement) and evidential plans. In addition, audit programs were found to change little over time with many tests done across a broad array of engagements. Overall, the responsiveness of evidential plans to risks, although limited, was found to be greater in the present study than prior research. These results, which generally replicate prior research, indicate the lack of a strong relationship between client risks and audit programs and thus raise a number of important questions for audit theory, practice and training.

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