Assessing inherent risk during audit planning: The development of a knowledge based model

Within the academic and professional auditing communities there has been growing concern with accurately assessing the various risks associated with the performance of an audit. One approach to developing sophisticated risk assessment models is to study how experienced expert auditors use industry and firm specific factors in making audit judgements. This study presents a model of inherent risk assessment based on literature reviews and a field study that involved structured and unstructured interviews and observations of experts in audit planning meetings. Analysis of the data gathered led to the specification of a conceptual model of inherent risk assessment which has been implemented as a computer program (a computational model). Auditors were asked to assess the behavior and performance of the computational model as a first step in evaluating the expert model.