Page 88 - CA Final PARAM Digital Book.

financial statements; (Har information collect karne ke baad risk ke baarein
mein sochtein raho)
• Relate the identified risks to what can go wrong at the assertion level, taking
account of relevant controls that the auditor intends to test; and (Kahi assertion
level pet oh nahi)
• Assess the identified risks, and evaluate whether they relate more pervasively to
the financial statements as a whole and potentially affect many assertions; (Ya
financial statement level pet oh nahi)
• Consider the likelihood of misstatement, including the possibility of multiple
misstatements, and whether the potential misstatement is of a magnitude that
could result in a material misstatement. (Badi risk toh nahi hai , with big amount
and more probability)

SA 330 The Auditor’s Responses to Assessed Risks

➢ Response for Risk at Financial Statement Level: - Overall Responses (E.g. More Seniors,
Experts / Professional Scepticism / Surprise Element / Supervision etc)
The auditor shall design and implement overall responses to address the assessed risks of material
misstatement at the financial statement level.

➢ Response for Risk at Assertion Level: - Further Audit Procedures / NTE should be
Responsive to RMM
The auditor shall design and perform further audit procedures whose nature, timing and extent are
based on and are responsive to the assessed risks of material misstatement at the assertion level.

➢ More Explanation: - Consider Reasons for RMM :- 1i. It is due to high likelihood because
of nature of item (i.e. inherent risk) 1ii. Which are relevant controls compensating this
risk, what’s control risk, if we are relying on this control then we need to check operating
effectiveness
In designing the further audit procedures to be performed, the auditor shall
• Consider the reasons for the assessment given to the risk of material misstatement
at the assertion level for each class of transactions, account balance, and disclosure,
including:
o The likelihood of material misstatement due to the particular
characteristics of the relevant class of transactions, account balance, or
disclosure (i.e., the inherent risk); and
o Whether the risk assessment takes into account the relevant controls
(i.e., the control risk), thereby requiring the auditor to obtain audit
evidence to determine whether the controls are operating effectively(i.e.,
the auditor intends to rely on the operating effectiveness of controls in
determining the nature, timing and ext000ent of substantive procedures);
and

➢ Higher RMM: - Higher RMM More Persuasive Evidence
• Obtain more persuasive audit evidence the higher the auditor’s assessment of risk.

QNO Internal Control Structure (Components) Old Course – (N18M)
40.120 TITANIUM CNO—Unique
XYZ Hospital Private Ltd. is engaged in running a hospital of 200 Beds since last 20 years. Revenue Track of
the hospital for last 3 years is as under:

2015-16 - 20 Crores
2016-17 25 Crores

2017-18 35 Crores

Hospital has its own Pharmacy, Laboratory, Blood Bank, Radiology & General Stores. Its management
suspects that leakages/theft is happening in Pharmacy, Radiology, Laboratory and General Stores
departments. It seeks advice of RST & Co., Internal Auditors of the Company, as to how it can

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