Representation of Audit Risk at the Balance Sheet Level with Evidential Network Approach: An Application in Turkey

Audit risk model is basically based on the idea of companies’ financial statements should fairly reflect the actual financial status of companies. Audit process represents the relationship between audit evidence and management assertions that associated with financial statement accounts at various levels. In other words, audit process includes collecting, aggregating and assessing audit evidence pertain to management assertions on accounts. Audit evidence includes structural uncertainty. Dempster-Shafer Theory of belief functions approach enables to represent audit evidence’s uncertainty. Evidential network provides a guidance to auditors for aggregating of audit evidences. In this study, it was tried to be shown the determination the audit risk with evidential network based on belief functions. For this purpose, according to a real audit case in Turkey, entity’s audit risk at balance sheet level was determined by the evidential network.