4.4 - Identifying and Assessing the Risks

Question 1

What does ISA (UK) 315 say is the objective of the auditor?

Answer 1

The objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels, thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement

Question 2

What is the first step an auditor needs to take to identify and assess the risks?

Answer 2

Identify the risks throughout the process of obtaining an understanding of the entity and its environment

Question 3

What is the second step an auditor needs to take to identify and assess the risks?

Answer 3

Assess the identified risks and relate them to what can go wrong at the assertion level (the assertions made in the financial statements by the directors)

Question 4

What is the third step an auditor needs to take to identify and assess the risks?

Answer 4

Consider whether the risks are of a magnitude that could result in a material misstatement

Question 5

What is the fourth step an auditor needs to take to identify and assess the risks?

Answer 5

Consider the likelihood of the risks causing a material misstatement