Page 15 - eBook Audit Of Financial Statement Components

The level of When inherent risks for sales and receivable transactions are high

detection risks and their control risks are low, it is appropriate for the auditor to
set a moderate level of detection risks to achieve the required
influences the
audit risk. The level of detection risks influences the number of
number of
procedures undertaken by the auditor to ensure the existence
procedures
and occurrence of sales transactions.
undertaken by

the auditor to
The substantive procedures should be carefully planned in to
ensure the
ensure that the type of procedures is effective to obtain
existence and
appropriate audit evidence to determine the existence of sales
occurrence of
and receivables transactions. When the planned level of
sales detection risk is low, the most effective substantive procedures

transactions. should be performed.

Effective substantive procedures help to reduce the detection risk
Effective
when the possibility of material misstatements remaining
substantive
undetected in individual assertions is low. This section discusses
procedures help
the substantive procedures for receivables and the related
to reduce the allowances. The types of substantive procedures are:

detection risk

when the i. Analytical procedures;

possibility of ii. Test of details of transactions, and

material iii. Test of details of balances.

misstatements
ANALYTICAL PROCEDURES
remaining

undetected in Analytical procedures are used to confirm expectations and

individual performed in three stages:
assertions is

low.

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