169 paragraphs found
The risks of material misstatement at the assertion level consist of two components: inherent risk and control risk. Inherent risk and control risk are the entity’s risks; they exist independently of the audit of the financial …
Inherent risk is higher for some assertions and related classes of transactions, account balances, and disclosures than for others. For example, it may be higher for complex calculations or for accounts consisting of amounts derived from accounting …
Control risk is a function of the effectiveness of the design, implementation and maintenance of internal control by management, or where applicable, those charged with governance, to address identified risks that threaten the achievement of the entity’s …
The assessment of the risks of material misstatement may be expressed in quantitative terms, such as in percentages, or in non‑quantitative terms. In any case, the need for the auditor to make appropriate risk assessments is more important than the …
ASA 315 establishes requirements and provides guidance on identifying and assessing the risks of material misstatement at the financial report and assertion …
For a given level of audit risk, the acceptable level of detection risk bears an inverse relationship to the assessed risks of material misstatement at the assertion level. For example, the greater the risks of material misstatement the auditor believes …
Detection risk relates to the nature, timing, and extent of the auditor’s procedures that are determined by the auditor to reduce audit risk to an acceptably low level. It is therefore a function of the effectiveness of an audit procedure and of its …
ASA 300 [21] and ASA 330 establish requirements and provide guidance on planning an audit of a financial report and the auditor’s responses to assessed risks. Detection risk, however, can only be reduced, not eliminated, because of the inherent …
The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain absolute assurance that the financial report is free from material misstatement due to fraud or error. This is because there are inherent limitations of an …
The preparation of a financial report involves judgement by management in applying the requirements of the entity’s applicable financial reporting framework to the facts and circumstances of the entity. In addition, many financial report items involve …