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LOGIC-PROBABILISTIC MODELING FOR THE RISK ASSESSMENT DURING THE AUDIT
Abstract
Information asymmetry is the most significant factor slowing down the financial market development, that exists at the moment in Russian economy, which is due to the lack of reliable financial statement information for investors. The main reasons for the current situation are the increase in the number of attempts and the variety of methods for falsifying the public companies financial statements. Therefore, an external audit conducted to increase investor confidence in the reliability of public companies' financial statements, requires continuous improvement of methods for detecting cases of its intentional distortion. The authors reviewed modern researches in the domain of the methodology and tools development, allowing to fulfill the auditor's responsibility to identify and assess the risk of material misstatement in the financial statements, including managements manipulations. As a result, benchmark criteria are formulated, which the method of assessment the risk of material misstatement in financial statements should meet, when performing audit engagement. In the context of benchmark criteria, the analysis of the possibility of adapting logic-and-probabilistic modeling for the risk assessment process when performing an assurance engagement was made. It was concluded that logic-and-probabilistic modeling is acceptable for the development and implementation of the risk assessment procedures when performing an audit engagement.
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