Inherent Risk Essay Example | Topics and Well Written Essays - 2500 words

Inherent Risk - Essay Example following paragraphs explains the importance of external auditors as well as internal auditors in the reducing or even eliminating the errors and frauds that stain the financial statements. The first step that the auditors do is to base their audit programs on the inherent risk of each item listed in the financial statements . This topic will further be explained in the following paragraphs(Courtney, Briggs,2004, p139). The company is owned by stockholders. Stockholders can invest their hard earned money in Qantas Airways Ltd. by just visiting the Australian stock exchange and paying for the number of shares of stocks pegged at the hours stock market share. Products. Qantas Airways Limited. is engaged in the transport of air passengers and cargo. The company provides international, domestic as well as internal or regional transport of air passengers and cargo In Australian airspace as well as outside Australia. The company also is engaged in other business activities aside from ferrying human beings from one corner of the world to another. The other financial activities include subsidiary investments in QantasLink and Jetstar. The company is also engaged in the business of inflight catering as well as holiday and travel activities. The above income statement shows that the expenses generated for the year ended June 2007 was 12,756. And, the expenses generated for the year ended June 2007 was 11,593.50 Plus, the expenses generated for the year ended June 2007 was 10,757.70. The inherent risk of this accounting item is that one or more of the accounting staff could recorded an expense in the journalisation stage of the accounting process when there is no right for such recording to occur. Generally accepted accounting principles and international accounting standards states that expenses should be recorded only if the corresponding use of an asset has also occurred. In addition, the accountant could have recorded an expense such as salary expense giving the