Economic sciences / 7. Accounting and Auditing

Mariia Nezhyva, postgraduate

Kyiv national university of trade and economics, Ukraine

Peculiarities audit risk in audit effectiveness of formation financial reserves

Financial reporting is the most important source of information for different entities. It has always been prone to distortion, this risk has always existed, but with the development of market relations became particularly relevant.

Audit effectiveness of formation financial reserves inherent large number of risks, including: audit risk, the risk of economic relations with the client, the client's risk of insolvency, reputational risk, the risk of making wrong decisions managers audit firm.

The auditor is responsible during the audit effectiveness of formation financial reserves for its opinion on the financial statements. When gathering information and evidence, the auditor should be thorough, and in assessing the data – objective.

Based on a comparative analysis series of concepts that define audit risk, we have concluded that audit risk in audit effectiveness of formation financial reserves of trade enterprises is a risk that a material misstatement of the financial reserves and the auditor will not detect this and expresses the view formed inappropriate financial reserves of trade enterprise and is calculated as the product of errors trade enterprise risk (inherent risk and control risk) and risk of errors auditor (detection risk).

In order to comply with specified level of audit risk in audit effectiveness of formation financial reserves necessary to analyze what factors may influence the size, and it investigates the components of audit risk, based on the fact that:

· the financial statements regarding financial reserves, which may contain significant verified error;

· auditor during the audit procedures in forming efficiency of financial reserves not detect these material errors.

Ideally, the overall audit risk should remain unchanged, ie constant act, which is supported through adequate assessment of risk detection. Otherwise, such as underestimation of materiality or improperly-assessment of risk of material misstatement risk detection for a particular audit may be understated, which automatically increases the overall audit risk.

Undue approaches to determining the level of materiality, failure to comply with auditing standards in course of the risk assessment can not provide the quality of audit effectiveness of formation financial reserves, and why should arise the legal responsibility of the audit. Time, nature and extent of audit procedures define risk assessment audit, which is fundamental for the effective work of the auditor.

Audit risk has two aspects that must be considered when assessing risk: first – the risk of error or abuse of a client; the second – the risk of errors auditor.

As for the measurement of risk is not typically use absolute or relative value risk, and they, qualitative characteristics: high, medium, low.

To auditor important to assess inherent risk, control risk and detection in audit effectiveness of formation financial reserves, as an important step in the review.

During the assessment of audit risk in audit effectiveness of formation financial reserves necessary to consider the following conditions.

· assessment of audit risk is a description of the auditor's expectations regarding the origin of the influence of external and internal factors on the process of audit opinions;

· assessment of audit risk is subjective in nature, that depend on the auditor's perception of the information used in the process of audit effectiveness of formation financial reserves;

· audit risk should be assessed as a value that is a component of parameters that affect the planning, auditing procedures and evaluating audit evidence obtained.

Availability of adequate assessment of audit risk attitude promotes objective information to users of the auditor and the results summarized in reports.

According to ISA 315 «Identifying and assessing the risks of material misstatement through understanding the entity and its environment» [1, p. 276-328] in the process of audit effectiveness of formation financial reserves audit risk may be adjusted and can be reduced in two ways:

· reduce the risk control – by increasing control tests;

· reduce the risk of detection – by increasing the tests on the merits.

Assessment of the risk inherent in audit effectiveness of formation financial reserves made at the planning stage. Assessment of risk is approximate and subjective because there is inherent risk in the presence of conditions that are not associated with the control system of trade enterprises.

Assessment of risk control in audit effectiveness of formation financial reserves made in several stages. Control procedures aimed at overcoming the risks that threaten the achievement of certain performance goals. The main control procedures in audit effectiveness of formation financial reserves include: inspection results, inspection data processing, physical controls, segregation of duties.

Risk assessment in audit effectiveness of formation financial reserves is a part of the risk in audit, that auditor can afford with appropriate accounting and internal control in the company. The risk of not detecting an indicator of the efficiency and quality of the auditor, which is related to professional competence and expertise of the auditor, and the only element of audit risk that the auditor may change.

Therefore, the assessment of audit risk and all of its components is one of the major problems in audit effectiveness of formation financial reserves, because of its size and adequacy assessment on the effectiveness and appropriateness of audit as a whole.

References:

1. Handbook of International Quality Control, Auditing, Review, Other Assurance and Related Services Pronouncements. Edition Part І. – New York: International Federation of Accountants, 2010 – 852 p.