Research On The Identification And Assessment Of Business Risk Under Risk Oriented Audit

The audit industry and the academic is dedicated to develop a modern risk-oriented audit model with business risk assessment as its critical procedure,to react to the rising phenomenon of management fraud and the more and more fierce competitive audit market.The new audit model emphasizes the implication of business risk to material misstatement risk,and the model strives to meet the higher and higher expectation of the public.Since 2007,with the push of China Ministry of Finance and the CICPA,modern risk-oriented audit model is being adopted in China step by step. How to identity the business risk of the entity is a critical issue when adopting the modern risk-oriented audit model,and it is crucial to the audit quality.Business risk is closely related to the entity's goals and strategy,its identification and assessment is also closely related to material misstatement risk and even audit risk.As pointed out in literature review,in modern risk-oriented audit,auditors analyze various sources of business risks,project business performance of the entity,and contrast the projection with management assertion.According to the material contrast(if any),auditors consider the possibility of management fraud,inappropriate accounting policy,inappropriate accounting estimate,the compliance of accounting information generation rules to determine the following audit procedure.This study establishes a business risk identification and assessment basing on literature review and elaborates the rationale of the establishment of the indicator system and the process of the data procession.The model this study establishes uses a 27 indicator system and uses fuzzy math to process the original data.What's more,the study indicates the following audit procedure of the result of the calculation of indicator system and exemplifies the business risk identification and assessment system with a real world audit case in real estate industry.