IntroductionIntroduction

Introduction

4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance on determining overall responses and designing and performing further audit procedures to respond to the assessed risks of material misstatement at the financial report and assertion levels in a financial report audit. The auditor’s understanding of the entity and its environment, including its internal control, and assessment of the risks of material misstatement are described in ASA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.

5 The following is an overview of this Auditing Standard:

(a) Overall responses. Under this section the auditor needs to determine overall responses to address risks of material misstatement at the financial report level. This section provides explanatory guidance on the nature of those responses.

(b) Audit procedures responsive to assessed risks of material misstatement at the assertion level. Under this section the auditor needs to design and perform further audit procedures, including tests of the operating effectiveness of controls, when relevant or required, and substantive procedures, whose nature, timing, and extent are responsive to the assessed risks of material misstatement at the assertion level. In addition, this section includes matters the auditor ordinarily considers in determining the nature, timing, and extent of such audit procedures.

(c) Evaluating the sufficiency and appropriateness of audit evidence obtained. Under this section the auditor needs to evaluate whether the risk assessment remains appropriate and to conclude whether sufficient appropriate audit evidence has been obtained.

(d) Documentation. This section establishes related documentation requirements.

6 In order to reduce audit risk to an acceptably low level, the auditor shall determine overall responses to assessed risks at the financial report level, and shall design and perform further audit procedures to respond to assessed risks at the assertion level.

7 The overall responses and the nature, timing, and extent of the further audit procedures are matters for the professional judgement of the auditor. ASA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of a Financial Report, also contains mandatory requirements and explanatory guidance on responding to assessed risks of material misstatement due to fraud.