Audit Fee

CAS 300 requires auditors to their audit using a risk based model where the nature, timing and extent of audit procedures are based on the assessed risk of material misstatement. Pickett (2006) argues that for audits to be effective and efficient, much of the audit effort should be focused on areas that are considered to pose the highest audit risk. Additional audit procedures should be linked to individual audit assertions whereas other audit procedures need to be performed as and when needed. Thus, for an audit plan to be put in place, it is necessary for an auditor to come up with a risk profile of the client comprising an understanding of the business operating by the audit client, assess business risk and also perform its preliminary analytical review.

Difficult to locate the fees by the auditors (more difficult than #2 because doesn’t increase the price as much)

The idea of “risk” is used in many fields and industries. There has been large efforts made towards the understanding of risk. Since, risk varies so much depending on the field of study, the need for learning about it is warranted. As can be imagined, the importance of risk in a market economy is crucial. In the 1990s, JP Morgan made the Value at Risk (VaR) a central component of its work efforts (Cecilia-Nicoleta, Anne-Marie, & Carmen-Maria, 2011).

Elder, A. A., Beasley, M., & Elder, R. J. (2014). Auditing and assurance services (15th ed.). Upper Saddle River, NJ: Pearson.

In a highly competitive industry there can be many inherent risk factors embedded in a company. Two factors that would affect audit planning decisions could be complex valuation issues and related party transactions. Valuation issues may lead the audit team to request more

(Coffey et al., 2003; Cox et al., 2001; Finn et al., 2000). These findings are correlational,

2 Managing fraud risk: The audit committee perspective Fraud in a fi nancial statement audit

Arens, A. A., Elder, R. J., & Beasley, M. S. (2013). Auditing and Assurance Services. Old Tappan, NJ: Pearson Education.

Cernauskas, D., & Tarantino, A. (2011). Essentials of Risk Management in Finance. Hoboken: John Wiley & Sons, Inc.

magnitude of these risks, this paper advocates for a more proactive solution. Active investing in

The authors relied heavily on two studies to create their argument. The first study mentioned was the Pinto et al article. In this study, "Pinto and colleagues (5) assessed the

“Audit committee members or their agents may proactively examine areas, functions, and personnel where collusive fraud risk is reasonably likely to be perpetrated,” (Zmags). The search for fraud, even if performed in the same location multiple times, may continue until the audit committee feels confident that they have ruled out the probability that fraud is prevalent. One of the biggest risks of fraud is management override of controls, requiring the extensive search for risk in, “journal entries and other adjustments and reviewing accounting estimates for possible biases that could result in material misstatements,” (Nysscpa).

When looking at the total assets, there is an inverse relationship between the amount of assets and the audit fees paid. Apple Inc. had the largest amount of total assets but paid the least amount in audit fees. On the other hand, Microsoft had the least amount of total assets but paid the most in audit fees. Finally, Walmart had the median amount of total assets and paid the median amount in fees. Comparing the fees by revenue did not produce any clear patterns, but comparing them by assets showed a clear inverse relationship.

1) Internal Auditors are expected to add value to the organization through improved operational effectiveness. In addition, their responsibilities include all the following except:

It is important to indicate that a country risk analysis is not static. As factors of the analysis change within the country, the risk of investing in that country also changes. These analyses are fluid and are always fluctuating. Changes can be indicative of deliberate governmental action taken by the country while other times the risks may change because of an action other countries have taken. The purpose of this paper is to create a risk analysis for the Republic of Nicaragua and to explain the