Planning the Audit - Coursework Example

Identifying and Responding to the Risks of Material Mis ment Identifying and Responding to the Risks of Material Mis ment a. The Issue being addressed in the paper The article “Risk-based auditing, strategic prompts, and auditor sensitivity to the strategic risk of fraud” by Bowlin (2011) primarily attempts to address the auditing risks related to misstatements that auditors often fail to detect due to lack of proper auditing procedures in the low particularly in the low risk audit areas.

In addition, the paper also investigates the potential implications of these risks for accounting firms and how they have prompted auditor sensitivity to strategic risk of fraud. According to the author, this is particularly attributed to the fact that fraud is often strategic in nature rather than random and the auditors may sometimes fail to detect potential fraud in the low risk audit areas when there is no sufficient audit procedure.b. What are the findings of the paper?One of the major findings of the paper is that the undetected misstatements among low risks accounts are significantly more common than what is suggested by the traditional risk assessment procedures.

However, the results of the research particularly suggest that prompting the auditors to consider the how the organizational management may anticipate or exploit the risk assessments of the auditors may significantly help in the reduction of the number of incidences of undetected misstatements. The other important findings of the research include that the management are often more likely to act strategically by targeting the low risk accounts in order to conceal misstatement and auditors normally fail to detect misstatements in low risk accounts.

This is largely based on the assumption that auditors would override the already existing process to personally include the misstatement in the low-risk account.c. Importance of the Paper to the Auditors and Implications to the Auditing ProfessionThis research paper is critically important to the upcoming or the already established auditors in the understanding of risk based instruct in financial statements preparations. This paper instructs the auditors to focus audit attention and resources majorly on the accounts that are preferably considered to be high-risk oriented for a specified audit engagement (Bowlin 2011).

One of the implications of this paper to accounting profession is induction measure into strategically low-risk accounts to disguise misstatement. d. The research methodology used The research methodology used in the research as a basis for the conclusion involved subjecting 123 participants derived from accounting students enrolled in upper-division classes to computer based simulations related to audit engagement. The students were then paired in such a way that one represented an auditor while the other a manager.

Next, the participants were subjected to a game involving the chance of misstatement. The results were then collected and analyzed. Through this well-coordinated manager-auditor participation; a well-planned risk-based auditing, strategic prompt and audit sensitivity to the strategic risk of fraud was arrived at. Limitations of the research One of the limitations of this research work was lack of a well-fumigated evidence based practice. The students used to present the final findings may have in one way or the other undertaken accounting fraud to present the professional findings (Bowlin 2011).

Students are learners hence the research work out to have presented a given amount of misstates. ReferencesBowlin, K. 2011. Risk-based auditing, strategic prompts, and auditor sensitivity to the strategic risk of fraud. The Accounting Review 86, 4, 1231–1253.