Please answer all these questions 1-What are the four primary causes of informat
ID: 343051 • Letter: P
Question
Please answer all these questions1-What are the four primary causes of information risk and how to reduce the information risk – advantages and disadvantages of each method? 2-Explain what is meant by: ‘degree of correspondence between information and established criteria?’ 3-What are the similarities and differences between: audit of financial statements, compliance audit and operational audit?
4-What is internal audit? Your answer should include the purpose/objectives of internal audit, how it is executed and its importance in an audit environment.
Please answer all these questions
1-What are the four primary causes of information risk and how to reduce the information risk – advantages and disadvantages of each method? 2-Explain what is meant by: ‘degree of correspondence between information and established criteria?’ 3-What are the similarities and differences between: audit of financial statements, compliance audit and operational audit?
4-What is internal audit? Your answer should include the purpose/objectives of internal audit, how it is executed and its importance in an audit environment.
Please answer all these questions
1-What are the four primary causes of information risk and how to reduce the information risk – advantages and disadvantages of each method? 2-Explain what is meant by: ‘degree of correspondence between information and established criteria?’ 3-What are the similarities and differences between: audit of financial statements, compliance audit and operational audit?
4-What is internal audit? Your answer should include the purpose/objectives of internal audit, how it is executed and its importance in an audit environment.
Explanation / Answer
1.Infromation risk refers to the possibility that the information upon which important decisions are made may be inaccurate. The primary causes of information risk include remoteness of information, voluminous data, complex exchanging transactions and biases and motives of the provider. The business obtain information from different sources through various channels and when the data needs to be obtained from the remote sources the chances of information risk also increases. The voluminous data makes it difficult to get the relevant data and if the business professionals are not able to identify the important information from the high volume data, the information becomes inaccurate. The complexity in business transactions also makes it difficult to identify the accurate data for decision making. The biases and motives of the provider also affect the accuracy of the information as the provider may modify the information accordingly.
There are three ways to reduce information risk and they are
1.The user verifies the information: when the user verify the information with the help available information sources, the chances of risk reduces. The advantages of this method are that user will get the desired information through verifying and after verifying the data user gets confident on the information provider. The disadvantages include the high cost involved in obtaining the information and the inconvenience that might cause to the information provider as there can be large number of users involved in the business.
2. User shares the information with management: When the user shares the information risk with management, it allows to understand the inaccuracies so that there is no further audit required. The advantage is that the method involves no audit cost. The disadvantage is that the user may not be able to collect on losses.
3. Audited financial statements: User can obtain the audited financial statements of the business which helps them to ensure that the information is accurate. This method allows making the information available for multiple users and the main advantage is that the risk gets reduced to the required level without much cost involved. The management need not spend their time on reducing the risk and hence it is a convenient method for the management. The disadvantage is that as the method is trying to address multiple users, some of the users may not get the benefit of audited financial statements. Another disadvantage is that the cost may be higher than benefits for small companies as the number of users may be less compared to large firms.