Risk Assessment Procedures and Related ARisk Assessment Procedures and Related Activities

Risk Assessment Procedures and Related Activities

1. In applying ASA 315,[14] the auditor shall perform the procedures in paragraphs 27–38. In doing so, the auditor shall consider whether one or more fraud risk factors are present. (Ref: Para. A49)

Information from Other Sources

1. In applying ASA 315,[15] the auditor shall consider whether information from other sources obtained by the auditor indicates that one or more fraud risk factors are present. (Ref: Para. A50–A51)

Retrospective Review of the Outcome of Previous Accounting Estimates

1. In applying ASA 540,[16] the auditor shall perform a retrospective review of management judgements and assumptions related to the outcome of previous accounting estimates, or where applicable, their subsequent re-estimation to assist in identifying and assessing the risks of material misstatement due to fraud in the current period. In doing so, the auditor shall take into account the characteristics of the accounting estimates in determining the nature and extent of that review. (Ref: Para. A52)

Engagement Team Discussion

1. In applying ASA 315,[17] when holding the engagement team discussion, the engagement partner and other key engagement team members shall place particular emphasis on how and where the entity’s financial report may be susceptible to material misstatement due to fraud, including how fraud may occur. In doing so, the engagement team discussion shall include: (Ref: Para. A43, A53–A54 and A59)
   1. An exchange of ideas about:
      1. The entity’s culture, management’s commitment to integrity and ethical values, and related oversight by those charged with governance; (Ref: Para. A55)
      2. Fraud risk factors, including: (Ref: Para. A56–A57)
         1. Incentives or pressures on management, those charged with governance, or employees to commit fraud;
         2. How one or more individuals among management, those charged with governance, or employees could perpetrate and conceal fraudulent financial reporting; and
         3. How assets of the entity could be misappropriated by management, those charged with governance, employees or third parties.
      3. Which types of revenue, revenue transactions or relevant assertions may give rise to the risks of material misstatement due to fraud in revenue recognition; and
      4. How management may be able to override controls. (Ref: Para. A58)
   2. A consideration of any fraud or suspected fraud that may impact the overall audit strategy and audit plan, including fraud that has occurred at the entity during the current or prior years.