Identify and explain four inherent risk factors

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Reference no: EM133926359

Audit risk is a major consideration in the planning of an audit.

Required

Define each of the following terms from an audit perspective:
(a) Audit risk
(b) Inherent risk
(c) Control risk
(d) Detection risk
(5 marks)

It is 1 July 20X5. Skile Co is a large company and a leading single-site manufacturer of go-karts and quad bikes. Owing to increasing demand for its products, the company has significantly increased its scale of operations over the last 12 months. This has resulted in a bigger workforce and the carrying out of substantial repairs, renovations and extension programmes to its factory and administration buildings. Using various financing methods, since September 20X4 Skile Co has also invested heavily in replacement and additional plant and machinery. Get expert-level assistance in any subject with our assignment help services.

As a part of the audit team engaged on the audit of the company's financial statements for the year ended 31 July 20X5, you recently attended an audit planning briefing meeting. At the meeting, your audit manager confirmed that your firm would adopt a risk-based approach to the audit of the financial statements and stated that the area of tangible non-current assets is of high inherent risk. Your manager also acknowledged that in arriving at a conclusion for certain areas of the financial statements your firm may need to rely on evidence provided by experts.

Required

Question: Identify and explain FOUR inherent risk factors that you would associate with the non-current assets area of the financial statements of Skile Co.

Reference no: EM133926359

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