How auditors assess and respond to risks of material misstatement in the financial statements is a critical component of audit quality, a new AICPA study finds.
The AICPA’s Assurance Research Advisory Group recently analyzed auditor risk assessment and response processes based on engagement teams’ real-world experiences with their clients.
Using anonymous surveys, the advisory group collected data from 21 audit firms on their risk assessment process and related audit responses.
The results showed that most of those surveyed combined their risk discussions, and most spent about 90 minutes on the combined discussion. The audit firms identified 90% of fraud risks and 87% of the other risks of material misstatement during the initial planning phase of the audit. See more findings.