Question

Please write in your own words

2. Discuss the following related to property management process:

a. Inherent risk assessment

b. Control risk assessment

c. Analytical procedures

Answer 1

Inherent risk is the risk posed by an error or omission in a financial statement due to a factor other than a failure of control. In a financial audit, inherent risk is most likely to occur when transactions are complex, or in situations that require a high degree of judgment in regards to financial estimates. This type of risk represents a worst-case scenario because all controls have failed.

control Risk Assesment is Probability of loss arising from the tendency of internal control systems to lose their effectiveness over time, and thus expose (or fail to prevent exposure of) the assets they were instituted to protect

Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential riskareas to plan other audit procedures.

Analytical procedures include comparison of financial information (data in financial statement) with

1. prior periods
2. budgets
3. forecasts
4. similar industries and so on.