<Inherent Risk >
1.Cash is more susceptible to theft than an inventory of coal
2.Susceptibility of notes receivable to material misstatement, assuming there are no related control.
3.Technological developments make a major product obsolete.
4.XYZ Company , a client , lacks sufficient working capital to continue operations.
<Control Risk >
1.A client fails to discover employee fraud on a timely basis because bank accounts are not reconciled monthly.
2.Disbursement have occurred without proper approval.
3.Inadequate segregation of duties.
1.Confirmation of receivables by an auditor fails to detect a material misstatement.
2.Omission of a necessary substantive audit procedure.
3.The merchandise inventory risk of incorrect acceptance is high.
P101 Prob#2 Planning procedures
<Correct procedures >
1.Determine the planned assessed level of control risk
2.Identify financial statement items likely to require adjustment.
3.Consider the client’s use of service organizations such as service centers.
4.Consider the nature of the audit reports expected to be rendered.
5.Consider the entity’s accounting policies and procedures.
6.Identify the methods used by the entity to process significant accounting information.
7.Consider the risk of the existence of related party transactions.
P102 Prob#3(Risk analysis of an entity )