Auditing Term Paper

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MZUMBE UNIVERSITY SCHOOL OF BUSINESS DEPARTMENT OF ACCOUNTING AND FINANCE

PROGRAMME: COURSE: CODE: NATURE:

MSC. ACCOUNTING AND FINANCE AUDITING AND ASSURANCE SERVICES ACC:5211 TERM PAPER

STUDENT NAME: HASSAN KH. JUMA. REG NO: LECTURER: TASK: MSC/AF/MOR/007/T.12 PHD. KASHESHI AUDIT RISK.

QUESTION : Discuss the business risks that may face an organization and the auditors’ concern about these risks.

DATE OF SUBMISSION AND PRESENTATION: 20/12/2012

1

TABLE OF CONTENTS

1.

INTRODUCTION ....................................................................................................................... 4 1.0 1.1 1.2 BACK GROUND INFORMATION ...................................................................................... 4 Definition of the terms ........................................................................................................... 4 Type and classification of business risk................................................................................. 4 Internal Business risk. ..................................................................................................... 4 External risks .................................................................................................................. 5 Operational risk .............................................................................................................. 5 Financial risk .................................................................................................................. 5 Compliance risk .............................................................................................................. 5

1.2.1 1.2.2 1.2.3 1.2.4 1.2.5 2. 3. 4. 5. 6. 7.

BUSINESS RISKS AND AUDIT RISKS .................................................................................... 5 WHY USE A BUSINESS RISK APPROACH ............................................................................. 6 DISADVANTAGES OF BUSINESS RISK: ................................................................................ 6 UNDESTANDING THE BUSINESS RISK APPROACH ........................................................... 6 RISK ASSESSMENT .................................................................................................................. 7 PROCEDURE USED TO MINIMIZE BUSINESS RISK ............................................................ 7 7.1 7.2 7.3 ENQUIRIES OF MANAGEMENT AND OTHERS WITHIN THE ENTITY: ...................... 8 ANALYTICAL PROCEDURES: .......................................................................................... 8 OBSERVATION AND INSPECTION: ................................................................................. 8

8.

THE WORK OF OTHERS TO ASSESS BUSINESS RISK. ........................................................ 8 8.1 8.2 8.3 USING THE WORK OF INTERNAL AUDITORS (ISA 610) .............................................. 8 USING THE WORK OF AN EXPERT (ISA 620) ................................................................. 8 USING THE WORK OF A SERVICE ORGANIZATION (ISA402) ..................................... 9

9.

HIGH RISK AREAS THAT AUDITORS SHOULD FOCUS. ..................................................... 9 9.1 9.2 PROCUREMENT. ................................................................................................................ 9 MARKETING. .................................................................................................................... 10 2

9.3 9.4

HUMAN RESOURCES ...................................................................................................... 10 TREASURY: ....................................................................................................................... 10

Treasury is function within the finance department of a business which associated with treasury. . 10 10. 11. 12. THE IMPLICATION OF BUSINESS RISK FOR THE...
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