Peer Review

The Audit Risk Model

Material Detail page

Reviewed:: Feb 17, 2015 by Business

Bookmark

Ratings

Overall Rating:

Content Quality:

Effectiveness:

Ease of Use:

Overview:

The Audit Risk Model is Module 6 of the ABC's of Auditing online course from the Finance Learning Academy. This 11:01 video explains the audit risk model expressed by the equation AR = IR x CR x DR where AR = audit risk, IR = inherent risk, CR = control risk, and DR = detection risk. Two cases are also presented to illustrate how the audit risk model is applied.

Type of Material:

Video Presentation.

Recommended Uses:

Educational resource that could be incorporated in traditional or online classes in place of an in-class presentation.

Technical Requirements:

Internet Browser, Media Video Player.

Identify Major Learning Goals:

To present the conceptual audit risk model.
Define model components and illustrate applications.
Highlight the interaction of each of the model components with one another, and on the auditor's subsequent testing and evidence needed.

Target Student Population:

Undergraduate/graduate auditing educators and students.

Prerequisite Knowledge or Skills:

Interest in auditing. Desire to understand the risks in the audit engagement. Intermediate Accounting II.

Content Quality

Rating:

Strengths:

Content quality is clear, concise, accurate, and relevant. This 11 minute video is packed with content and thoroughly covers the audit risk conceptual model. As a result, the video is self-contained.

This video will benefit viewers who can watch it multiple times, as students typically do not grasp all aspects of the model from a single encounter.
- The inclusion of relevant terms in the background to provide context is excellent (reasonable assurance, material misstatement). This technique is a simple but effective way to highlight and focus student awareness on these important terms. Also, the continued use of the overlay of terms and examples helps the viewer when they pause and backtrack to find the portion of the video they want to review again.
  - The author's presentation technique offers the audience an entertaining discussion of the interrelationships of audit risk factors and the extent of work performed by auditors to gather evidence & render their audit opinion.
    - The illustration of the audit risk factors encountered throughout the entire audit process is excellent.
      - The discussion of the resulting effects on the extent of audit procedures performed during test of details and balances on various accounts and related audit assertions is also well done.
        Auditing is a difficult topic to teach, howeve, this author was able to professionally integrate his auditing experience in an engaging manner.

Concerns:

None

Potential Effectiveness as a Teaching Tool

Rating:

Strengths:

This video presentation is exceptionally efficient and teaches a considerable amount of content in a very short time. Concepts are reinforced progressively, building on prior concepts, and demonstrate relationships between the concepts.

Any prerequisite knowledge required is appropriately interspersed throughout the module.
- The discussion of audit assurance being the complement of audit risk is very nice.
  - The inclusion of the role of professional judgment and iterative nature of the model is very good.
    - Making the clarification that detection risk is planned detection risk helps facilitate understanding in the initial exposure to the subject.
      - The inclusion of the cost benefit issues associated with the audit risk model, with the goal being to minimize the risk, not to eliminate the risk is excellent.
        Finally, noting that the audit risk model can be used both at a high level and a transaction cycle level is excellent as well.

Concerns:

None

Ease of Use for Both Students and Faculty

Rating:

Strengths:

The author’s website and related educational videos are professionally designed and visually appealing. The author has a gift for presenting complex technical material in a very simple manner. The author is very enthusiastic about the auditing profession and has a captivating voice. He interjects meaningful visualizations to illustrate concepts nicely during his presentation.

The adaptation of the often-used umbrella model to describe inherent, control risk, and detection risk is very nice. This adaptation includes windbreaker and survival suit analogies to illustrate the difference between a light rain audit situation and a monsoon situation.
- During the two case comparison, good interjections were made as to how assessing internal control risk at less than 100% equates to a need for evidence to test. It is especially beneficial that the two cases are presented at each extreme to reinforce the impact of the variables and the impact on detection risk, evidence needed, and substantive testing.
  - The presentation clarifies the importance of high vs. low levels of detection risk, and the corresponding relationship of the levels of this variable with the amount of evidence needed. The reinforcement provided by the preparer is necessary and helpful to anyone trying to grasp these inter-relationships.

Other Issues and Comments:: The author has scripted and planned this video very well. The words used in the video are carefully chosen to be very clear for instruction. The progression and flow from point to point is very smooth, nicely integrated, and completely coherent. Closed captioning has also been incorporated to improve accessibility aspects of the video.
Creative Commons: