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Chapter 4

Risk

Outcome

By the end of this session you should be able to:

 explain the need to plan and perform audits with an attitude of professional
scepticism, and to exercise professional judgment

 explain the components of audit risk

 describe the audit risks in the financial statements and explain the auditor’s
response to each risk

 define and explain the concepts of materiality and performance materiality

 explain and calculate materiality levels from financial information

 explain how auditors obtain an initial understanding of the entity and its
environment

 describe and explain the nature, and purpose of, analytical procedures in
planning

 compute and interpret key ratios used in analytical procedures

and answer questions relating to these areas.

The underpinning detail for this chapter in your Integrated Workbook can
be found in Chapter 4 of your Study Text

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