PSA 315

August 3, 2018 | Author: Joanna Caballero | Category: Audit, Risk Assessment, Risk, Accounting And Audit, Business
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Short Description

*notes on Auditing Theory along with some principles...

Description

IDENTIFYING AND  ASSESSING THE RISKS OF MATERIAL MISSTATEMENT MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT PSA 315

OBJECTIVE FRAUD

UNDERSTANDING…

Implemen tation

IDENTIFY ENTITY

Risks of material ITS ENVIRONMENT

INCLUDING…

INTERNAL CONTROL

Design

Basis for

misstatement ASSESS

ERROR

Responses to the assessed risks of material misstatement

DEFINITIONS a)  b) c) d) e)

Asse Assert rtio ions ns Business risk  Inte In tern rnal al con contr trol ol Risk Risk assessm assessment ent proce procedur dures es Sign Si gnif ific ican antt risk  risk 

REQUIREMENTS     

Risk Assessment Procedures and Related Activities The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control Identifying and Assessing the Risks of Material Misstatement Material Weakness in Internal Control Documentation

RISK ASSESSMENT PROCEDURES AND RELATED ACTIVITIES Provides a basis for the identification and assessment of risks of  mate materi rial al miss missta tate teme ment nt at the the fina financ ncia iall stat statem emen entt and and asse assert rtion ion leve levels ls.. (Note: (Note: This does not provide sufficient sufficient appropri appropriate ate audit audit evidence to base the audit opinion.)  Includes:  Inquiries  

of management, and of others within the entity who in the auditor’s judgment may have information that is likely to assist in identifying risks of material misstatement due to fraud or error.  Analytical procedures (To be discussed discussed in PSA PSA 520). Observation and inspection

REQUIREMENTS     

Risk Assessment Procedures and Related Activities The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control Identifying and Assessing the Risks of Material Misstatement Material Weakness in Internal Control Documentation

THE REQUIRED UNDERSTANDING OF THE ENTITY AND ITS ENVIRONMENT, INCLUDING THE ENTITY’S INTERNAL CONTROL

The Entity and Its Environment

Internal Control

THE REQUIRED UNDERSTANDING OF THE ENTITY AND ITS ENVIRONMENT, INCLUDING THE ENTITY’S INTERNAL CONTROL The auditor shall obtain an understanding of the …

Measuremen t and review of the entity’s financial performance.

Objectives and Strategies

Relevant industry, regulatory, and other external factors including the applicable financial reporting framework.

Nature of the Entity

The Entity and Its Environment

Selection and application of accounting policies

THE REQUIRED UNDERSTANDING OF THE ENTITY AND ITS ENVIRONMENT, INCLUDING THE ENTITY’S INTERNAL CONTROL Sources of Information:

THE REQUIRED UNDERSTANDING OF THE ENTITY AND ITS ENVIRONMENT, INCLUDING THE ENTITY’S INTERNAL CONTROL Control Activities Risk Assessment

Internal Control

Do you remember  your CRIME CRIME??

Information System

Monitoring Control

Environment

Components

REQUIREMENTS     

Risk Assessment Procedures and Related Activities The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control Identifying and Assessing the Risks of Material Misstatement Material Weakness in Internal Control Documentation

IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT The auditor shall identify and assess the risks of material misstatement at: Financial Statement Level

Assertion Level

• •



Transactions Account balances Disclosures

Basis for designing and performing further audit procedures

REQUIREMENTS     

Risk Assessment Procedures and Related Activities The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control Identifying and Assessing the Risks of Material Misstatement Material Weakness in Internal Control Documentation

MATERIAL WEAKNESS IN INTERNAL CONTROL The auditor shall communicate material weaknesses in internal control identified during the audit on a timely basis to management at an appropriate level of responsibility, and, as required by PSA 260 (Revised), “Communication with “Communication  with Those Charged with Governance,” Governance ,” with  with those charged with governance governance (unless all of those charged with governance go vernance are involved in managing the entity).

REQUIREMENTS     

Risk Assessment Procedures and Related Activities The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control Identifying and Assessing the Risks of Material Misstatement Material Weakness in Internal Control Documentation

DOCUMENTATION The auditor shall document: a) The discus discussion sion among among the the engagem engagement ent team team and and the the significan significantt decisions reached;  b) Key elements elements of the understanding understanding obtained obtained regarding regarding each of the aspects of the entity and its environment and of each of the internal control components; the sources of information from  which the the understanding understanding was was obtained; and the risk assessment assessment procedures performed; c) The identi identified fied and assess assessed ed risks risks of of materia materiall misstate misstatemen mentt at the the financial statement level and at the assertion level; d) The risks risks identif identified, ied, and and related related contro controls ls about about which which the auditor auditor has obtained an understanding.

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