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DETECTION RISK EVIDENCE ACCUMULATION3D THE AUDIT RISK MODEL IN PRACTICE5This is defined in AUS 402 as the susceptibility of an account balance to misstatement that could be material assuming there were no related internal controls AUS 40209Estimating the inherent risk IR for each account balance or class of transactions requires the auditor to take into account such factors as the level of complexity involved in determining the correct balance of an account the complexity of transactions involving the particular accounts and the portability of the assets involvedThe estimation of IR is done as though no internal controls exist it looks only at the nature of the account being evaluatedAUS 402 defines this as the risk that misstatements that could occur in an account balance that could be material will not be prevented or detected on a timely basis by the internal control structure AUS 40206 The evaluation of the level of control risk CR requires the auditor to have a thorough understanding of the internal control structure that is in place and practiced not necessarily the same thing within the organisation to be studied Elements such as the segregation of duties the existence of management overrides and the level of formalised policies and procedures in use are among the factors to be consideredDefined in AUS 402 as the risk that the auditor gives an inappropriate audit opinion when the financial report is materially misstated AUS 40203The level that is set as the acceptable audit risk AR reflects the degree of certainty that the auditor and audit subject wish to achieve An audit opinion can never be a guarantee AR 0 even if every transaction during the year was tested due at least in part to the interpretive nature of many of the accounting decisions involvedThe final part of the risk model outlined in AUS 402 is defined as the risk that an auditors substantive procedures will not detect a misstatement AUS 40207This risk
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