Audit Risks

The main purpose of the audit is to provide evidence of a reliability of the information obtained from those which are entrusted by the management, to all interested parties. The management of the economic entity is obliged to create, implement and store accounting records and to take care of the
preparation of financial statements in accordance with generally accepted standards and financial reporting framework. The performance of the audit (internal and external) means to respect certain principles of the audit. A professional accountant – internal auditor and the external auditor must
respect the following basic audit principles in order to minimize the audit risk:

• Objectivity – to not allow a conflict of interest, any bias in decisions making; or any influences from
other entities that are contrary to professional or business discernments;
• Integrity – the auditor must be sincere and honest in all professional and business relationships;
• Confidentiality – the auditor must respect the confidentiality of information on which he/she has access as a result of his/her professional and business engagement. This means that the information available to him/her is not allowed to be disclosed to other parties without a
corresponding and specific authority, except if he/she is authorized by law or required to disclose such information. Also, the auditor must not use the information acquired in the process of auditing for any kind of personal benefit, and if it is proven such activity, it will be legally sanctioned;
• Professional behaviour – the auditor is obliged to comply with relevant laws and regulations an avoid any action that can discredit the profession;
• Conflict of interests – the auditor must not perform audit activity if there is any a form of conflict of interest with the subject being reviewed. Efficiency and effectiveness of the business entities financial statements audit largely depend on the understanding and implementation of the three fundamental auditing concepts: the concept of materiality – relevance, audit risk and the concept of audit evidence. The audit process is constantly followed by risk – the risk that the auditor can make mistakes in expressing his/her opinion on the accuracy and validity of the data presented in the financial statements. Audit risk as a whole consists in the existence of a potential possibility for the auditor to present a positive opinion on the audited financial statements (by mistake or on purpose),
even in circumstances where they de facto contain material shortcomings in the results in the way of presentation. Professional auditing standards the audit risk identify with the aforementioned risk types: Inherent risk, Control risk and the possibility for the auditor to not reveal all material shortcomings in the presentation.