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Auditing > ISA 315: Risk > Flashcards

ISA 315: Risk Flashcards

1
Q

State the types of audit risks

A
  • Risk of material misstatement
  • Detection risk
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2
Q

State the different types of material misstatement

A
  • Inherent risk
  • Control risk
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3
Q

What is risk of material misstatement?

A

Is the risk that the financial statement may be materially misstated

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3
Q

What is risk of material misstatement caused by?

A
  • Fraud
  • Error
  • Going concern
  • Management integrity
  • etc
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4
Q

What does risk of material misstatement at overall financial statement level consist of?

A
  • Inherent risk
  • Control risk
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5
Q

What does risk of material misstatement consist of at assertion level?

A
  • Account balances - B/S
  • Classes of transactions - I/S
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6
Q

Explain inherent risk

A

The risk that something within the business is creating risk

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7
Q

Explain control risk

A

The risk that the controls implemented within the entity is not operating effectively which lead to fraud or error occurring in the preparation of the annual financial statements

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8
Q

State the control objectives

A
  • CAVR
  • Prevent
  • Detect
  • Correct
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9
Q

Define completeness (account balances)

A

All assets, liabilities and equity interest that should have been recorded are actually recorded

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10
Q

Define existence (account balances)

A

Assets, liabilities, and equity interests exist

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11
Q

Define rights and obligations (account balances)

A

The entity holds or controls the rights to assets, and liabilities are the obligations of the entity

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12
Q

Define valuation and allocation (account balances)

A

Assets, liabilities and equity interests are included in the financial statements at appropriate amounts and any resulting
valuation or allocation adjustments have been appropriately
recorded, and related disclosures have been appropriately measured and described.and any resulting valuation or allocation adjustment are appropriately recorded

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13
Q

Define presentation (account balances)

A

Assets, liabilities and equity interests are appropriately aggregated or disaggregated and clearly described and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework

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14
Q

Define occurrence (classes of transaction)

A

Transactions and event that have recorded have occurred and pertain to the entity

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15
Q

Define completeness (classes of transactions)

A
  • All transactions and event that should have been recorded have been recorded, and all related disclosures that should
    have been included in the financial statement have been included.
  • You will need to identify whether everything is recorded and that
    nothing is omitted.
16
Q

Define accuracy (classes of transactions)

A

Amounts and other data relating to recorded transactions and events have been recorded appropriately

17
Q

Define cut-off (classes of transactions)

A

Transactions and events have been recorded in the correct accounting period

18
Q

Define classifications (classes of transactions)

A

Transactions and events have been recorded in the proper accounts

19
Q

Define presentations

A

Transactions and events are appropriately aggregated or disaggregated and clearly described and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework

20
Q

What is detection risk?

A

Is the risk that the auditor may not detect fraud or errors within the financial statements
(RISK OF MATERIAL MISSTATEMENTS DOES NOT INCLUDED DETECTION RISK)

21
Q

Explain business risks

A
  • Is the exposure a company or organisation has to factors that will lower its profit or lead it to fail
  • Anything that threatens a company’s ability to achieve its financial goals is considered a business risk
  • not the same as a risk of material misstatement
22
Q

State the different types of classes of transactions

A
  • Occurrence
  • Completeness
  • Accuracy
  • Cut-off
  • Classification
  • Presentation
23
Q

State the different types of account balances

A
  • Completeness
  • Existence
  • Rights and obligation
  • Valuation and allocation
  • Presentation

Auditing (6 decks)

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