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    3rd Cls Test 20.12.22

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    Aquib Rahman
    1) Control risk cannot be eliminated completely in an audit because internal controls may fail or be overridden by management. 2) Given the information provided about audit risk, inherent risk, and control risk, the detection risk can be calculated and is medium, between 0.3 to 0.5, consistent with the risk assessments made in audit planning. 3) For an audit of a bank with $76 million in revenue, $6.4 million in pre-tax profit, and $104 million in total assets, audit materiality would be calculated based on a percentage of an appropriate benchmark like pre-tax profit or revenues, as discussed in audit planning classes.

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    3rd Cls Test 20.12.22

    Uploaded by

    Aquib Rahman
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    1) Control risk cannot be eliminated completely in an audit because internal controls may fail or be overridden by management. 2) Given the information provided about audit risk, inherent risk, and control risk, the detection risk can be calculated and is medium, between 0.3 to 0.5, consistent with the risk assessments made in audit planning. 3) For an audit of a bank with $76 million in revenue, $6.4 million in pre-tax profit, and $104 million in total assets, audit materiality would be calculated based on a percentage of an appropriate benchmark like pre-tax profit or revenues, as discussed in audit planning classes.

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    1) Control risk cannot be eliminated completely in an audit because internal controls may fail or be overridden by management. 2) Given the information provided about audit risk, inherent risk, and control risk, the detection risk can be calculated and is medium, between 0.3 to 0.5, consistent with the risk assessments made in audit planning. 3) For an audit of a bank with $76 million in revenue, $6.4 million in pre-tax profit, and $104 million in total assets, audit materiality would be calculated based on a percentage of an appropriate benchmark like pre-tax profit or revenues, as discussed in audit planning classes.

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    © All Rights Reserved
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    11 views1 page

    3rd Cls Test 20.12.22

    Uploaded by

    Aquib Rahman
    1) Control risk cannot be eliminated completely in an audit because internal controls may fail or be overridden by management. 2) Given the information provided about audit risk, inherent risk, and control risk, the detection risk can be calculated and is medium, between 0.3 to 0.5, consistent with the risk assessments made in audit planning. 3) For an audit of a bank with $76 million in revenue, $6.4 million in pre-tax profit, and $104 million in total assets, audit materiality would be calculated based on a percentage of an appropriate benchmark like pre-tax profit or revenues, as discussed in audit planning classes.

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    of 1

    Name:……………………………………………………………

    ID # …………………………………………………………….
    BRAC BUSINESS SCHOOL
    BRAC UNIVERSITY
    ACT425: Principles of Auditing
    Third Class Test
    Marks- 10
    Time-30 min

    1. “Control Risk (CR) in an audit cannot be eliminated completely”. Explain why? [Marks-2]

    2. Consider following information:


    i. Auditor assumes Audit Risk (AR) at 10% level. So, value of AR is 0.1
    ii. Assessed Inherent Risk (IR) is Medium. So, value of IR can be taken between 0.3 to 0.5
    iii. Assessed Control Risk (IR) is Medium. So, value of CR can be taken between 0.3 to 0.5

    Calculate the value of Detection Risk (DR) and interpret the result in line with the discussion in our classes.
    [Marks- 4]
    3. You are the manager responsible for the audit of Boston Bank Limited. The audit of the financial statements for
    the year ended 31 December 2021 is at planning stage. Now you are calculating the audit materiality. The
    financial statements recognise revenue of $76 million, profit before tax for the year of $6·4 million and total
    assets of $104 million.

    Calculate the Audit Materiality and explain your answer in line with the discussion in our classes. [Marks- 4]

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