Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p58
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 169444–172630

misstatement are identified and assessed by the auditor in order to determine the nature, timing and extent of further audit procedures necessary to obtain sufficient appropriate audit evidence.  This evidence enables the auditor to express an opinion on the financial report at an acceptably low level of audit risk.

A185.      Information gathered by performing risk assessment procedures is used as audit evidence to provide the basis for the identification and assessment of the risks of material misstatement.  For example, the audit evidence obtained when evaluating the design of identified controls and determining whether those controls have been implemented in the control activities component, is used as audit evidence to support the risk assessment.  Such evidence also provides a basis for the auditor to design overall responses to address the assessed risks of material misstatement at the financial report level, as well as designing and performing further audit procedures whose nature, timing and extent are responsive to the assessed risks of material misstatement at the assertion level, in accordance with ASA 330.

Identifying Risks of Material Misstatement (Ref: Para. 28)

A186.      The identification of risks of material misstatement is performed before consideration of any related controls (i.e., the inherent risk), and is based on the auditor's preliminary consideration of misstatements that have a reasonable possibility of both occurring, and being material if they were to occur.[49]

A187.      Identifying the risks of material misstatement also provides the basis for the auditor's determination of relevant assertions, which assists the auditor's determination of the significant classes of transactions, account balances and disclosures.

Assertions

Why the Auditor Uses Assertions

A188.      In identifying and assessing the risks of material misstatement, the auditor uses assertions to consider the different types of potential misstatements that may occur.  Assertions for which the auditor has identified related risks of material misstatement are relevant assertions.

The Use of Assertions

A189.      In identifying and assessing the risks of material misstatement, the auditor may use the categories of assertions as described in paragraph A190(a)‒(b) below or may express them differently provided all aspects described below have been covered.  The auditor may choose to combine the assertions about classes of transactions and events, and related disclosures, with the assertions about account balances, and related disclosures.

A190.      Assertions used by the auditor in considering the different types of potential misstatements that may occur may fall into the following categories:

(a)                Assertions about classes of transactions and events, and related disclosures, for the period under audit:

(i)                 Occurrence—transactions and events that have been recorded or disclosed have occurred, and such transactions and events pertain to the entity.

(ii)               Completeness—all transactions and events that should have been recorded have been recorded, and all related disclosures that should