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Comptronix

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Team Osprey Comptronix Case 10/28/10 1. Professional auditing standards present the audit risk model, which is used to determine the nature, timing, and extent of audit procedures. Describe the components of the model and discuss how changes in each component affect the auditor¶s need for evidence. The Audit Risk Model (ARM) is defined as: a. Inherent Risk is the auditor¶s measure of assessing whether material misstatements exist in the financial statement before considering of internal controls. Ignoring internal controls, if the auditor assesses that the likelihood of material errors is high, the auditor will assume that the Inherent Risk is high. As the Control Risk constitutes a separate component of the Audit Risk Model, it is ignored here. b. Control Risk is the auditor¶s measure of assessing the likelihood that the client¶s internal control system is unable to prevent or detect material misstatements exceeding a tolerable level. In assessing the level of the Control Risk, the auditor will assess the effectiveness of the firm¶s internal...