Risk Management

Question 1

What are the directors responsibility in respect of risk?

Answer 1

It is the director’s responsibility to implement internal controls and monitor their application and effectiveness.
The risks considered by management are numerous. They come from both external, environmental sources and internal, operational ones. The main aim of risk management is to protect the business from unforeseen circumstances that could negatively impact the profitability of the company and stop it achieving its strategic goals.

Question 2

Auditors responsibilities in response to risk?

Answer 2

Auditors are not responsible for the design and implementation of their clients’ control systems. Auditors have to assess the effectiveness of controls for reducing the risk of material misstatement of the financial statements. They incorporate this into their overall audit risk assessment, which allows them to design their further audit procedures.
In addition to this, auditors are required, in accordance with ISA 265, to report significant deficiencies in client controls and any significant risks identified during the audit to those charged with governance.