comment on the efficiency or otherwise of internal control systems of NPD realting to its cash receipts
Answers
Explanation:
Audit risk and its components
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially
misstated. Audit risk is a function of two main components being the risks of material misstatement and detection risk. Risk
of material misstatement is made up of two components, inherent risk and control risk.
Inherent risk is the susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement
that could be material, either individually or when aggregated with other misstatements, before consideration of any related
controls.
Control risk is the risk that a misstatement which could occur in an assertion about a class of transaction, account balance
or disclosure and which could be material, either individually or when aggregated with other misstatements, will not be
prevented, or detected and corrected, on a timely basis by the entity’s internal control.
Detection risk is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not
detect a misstatement which exists and which could be material, either individually or when aggregated with other
misstatements. Detection risk is affected by sampling and non-sampling risk.