Risk Assessment Procedures and Related ARisk Assessment Procedures and Related Activities

Risk Assessment Procedures and Related Activities

1. In applying ASA 315,[3] the auditor shall design and perform risk assessment procedures, including those required by paragraph 12, to obtain audit evidence that provides an appropriate basis for determining whether events or conditions have been identified that may cast significant doubt on the entity’s ability to continue as a going concern. The identification of such events or conditions shall be before consideration of any related mitigating factors included in management’s plans for future actions. (Ref: Para. A7–A15)

Obtaining an Understanding of the Entity and Its Environment, the Applicable Financial Reporting Framework and the Entity’s System of Internal Control

1. In applying ASA 315,[4] the auditor shall perform risk assessment procedures to obtain an understanding of: (Ref: Para. A9–A15)

The Entity and Its Environment

1. The entity's business model, objectives, strategies and related business risks relevant to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. (Ref: Para. A16)
2. Industry conditions, including the competitive environment, technological developments, and other external factors affecting the entity’s financing.
3. The measures used, internally and externally, to assess the entity's financial performance, including forecasts, future cash flows, and management's budgeting processes. (Ref: Para. A17)

The Applicable Financial Reporting Framework

1. The requirements of the applicable financial reporting framework relating to going concern, and the related disclosures that are required to be included in the entity's financial report. (Ref: Para. A18, A20)
2. The basis for management’s intended use of the going concern basis of accounting. (Ref: Para. A19–A20)

The Entity’s System of Internal Control

1. Unless all of those charged with governance are involved in managing the entity,[5] how those charged with governance exercise oversight over management’s assessment of the entity's ability to continue as a going concern. (Ref: Para. A21–A22)
2. The entity's risk assessment process to identify, assess and address business risks relating to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern.
3. How management identifies the relevant method, significant assumptions and data that are appropriate in assessing the entity's ability to continue as a going concern. (Ref: Para. A23–A24)