4.1 Business risk is the risk that could adversely affect company’s ability to achieve objectives and execute strategies.
4.3 Clients financial statements are effected by environment including economic and political event, weather occurrence, technological advances and social and demographic pattern. Auditors need to make sure the statements are fairly presented.
4.5 Overstating revenue and Asset; Understanding expenses and liabilities; giving disclosures that are misstated or omit important information; cash shortage, increased competition, cost overrun.
4.7 Risk of Material Misstatement components are: Inherent risk, control risk
Audit risk components are: Inherent risk, control risk, detection risk.
4.9 Nature refers to the overall effectiveness of the audit procedure in detecting misstatement. Timing refers to when the audit procedure takes place. Extent refers to the number of test performed.
4.11 To determine what information management or financial statement users might be sensitive to
4.13 Auditors should be knowledgeable and understanding on the following factors: the broad economic environment in which the client operates knowledge of the competition and the understanding of the clients market. PCAOB is a method of source of information for auditors understanding clients business and industry.
4.15 Develop an expectation; define a significant difference; compare expectation with the recorded amount; investigate
