Critically Evaluate The Business Risk Audit Methodology

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Q1. Critically evaluate the business risk audit methodology. (585 Words)

Business risk audit methodology (141 Words)
A risk-based audit methodology is designed to be used throughout the audit to efficiently and effectively focus the nature, timing and extent of audit procedures to those areas that have the most potential for causing material misstatements in the financial report. ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment and ASA 330 The Auditor’s Responses to Assessed Risks are auditing standards that specifically set out the riskbased audit approach, with other auditing standards containing specific risk-related principles and procedures appropriate to
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Risk management processes, including the effectiveness of responses and the completion of actions, are being monitored by management to ensure they continue to operate effectively
5. Risks, responses and actions are being properly classified and reported.

The fact that risk based auditing encourages auditors to have integrated knowledge of businesses makes the whole process of auditing less daunting as it used to be. Other benefits of following the risk based approach of auditing are better understanding of business and its environment, Increased chance of achieving audit objective, Saves resources and makes audit planning easier.
Disadvantages of risk-based audit approach (150 Words) risk-based audit methodology is inextricably linked to the risk management framework. During Stage 1 it allows a conclusion on the risk maturity of the organisation. If this is not high, it provides internal audit with an opportunity to report that fact promptly to management and the audit committee so that they can take immediate action. While this allows the internal audit activity to provide value to its organisation, RBIA is a challenging prospect. Organisations with a poor level of risk maturity may be that way because the managers and directors do not accept that a good risk management framework is an essential element of a sound system of internal control. Internal audit may need to undertake a longer term programme of activity to champion
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