Why should modern audit adopt risk-oriented audit method?

The increasing audit risk is the direct cause of risk-oriented audit. In fact, risks always exist in auditing. In the first stage, the goal of audit is to expose mistakes and investigate shortcomings. Because the economic business is relatively simple, auditors can basically meet the needs of audit objectives through careful examination, and there is no clear regulation on the responsibilities of auditors in society.

At that time, audit risk could not become a reality, nor would it pose a threat to the audit community. Auditors' understanding of audit risks is still in a vague stage.

This shows that the audit profession is fully aware of the public demand and the contradiction that needs to be solved in its own development, that is, to reduce the audit risk to an acceptable level and meet the public's information demand. If you don't actively perform your duties, you will face great risks, even the survival of your career.

Risk-oriented audit takes audit risk as the starting point of audit work. By evaluating all the links that generate risks, paying attention to every important link that generates risks and defining high-risk projects, the audit process becomes a process of constantly overcoming and reducing risks.

The audit risk of extended data is affected by the internal risk factors of the enterprise, such as the conduct and ability of managers, the environment in which the industry is located, the nature of business, the items that are prone to misstatement in accounting statements, the assets that are prone to loss or misappropriation, and the internal control risk factors, that is, the account balance or various transactions are misstated, and the internal control fails to prevent, find or correct them.

In addition, due to the CPA's failure to find the account balance or the risk of misstatement in various transactions, the professional community quickly developed an audit risk model, that is, audit risk = material misstatement risk × inspection risk.

The appearance of audit risk model not only theoretically solves the randomness of CPA's sampling audit based on the system, but also solves the problem of the allocation of audit resources, requiring CPA to allocate audit resources to the fields that are most likely to lead to major misstatement of accounting statements.

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