Page 93 - CA Final PARAM Digital Book.

audit opinion. Some of the matters the auditor should consider when planning the audit
procedures include:
• Audit procedures designed to address the assessed risks could include a mixture of:
o Tests of the operational effectiveness of internal control; and
o Substantive procedures such as tests of details and analytical procedures.
• The need to perform further audit procedures to address the potential for
management override of controls or other fraud scenarios.
• Existence of internal control that, if tested, could reduce the need / scope for other
substantive procedures.
• The potential for substantive analytical procedures that would reduce the need/scope
for other types of procedures.
• Assertions that cannot be addressed by substantive procedures alone. This can occur
where there is highly automated processing of transactions with little or no manual
intervention.
• The need to perform specific procedures to address “significant risks” that have been
identified.
• The need to incorporate an element of unpredictability in procedures performed.

Reporting
The final phase of the audit is to assess the audit evidence obtained and determine whether
it is sufficient and appropriate to reduce the risks of material misstatement in the financial
statements to an acceptably low level.
It is important at this stage to determine:
• If there had been a change in the assessed level of risk;
• Whether conclusions drawn from work performed are appropriate; and
• If any suspicious circumstances have been encountered.
• Any additional risks should be appropriately assessed, and further audit procedures
performed as required.
• When all procedures have been performed and conclusions reached:
• Audit findings should be reported to management and those charged with
governance; and
• An audit opinion should be formed, and a decision made on the appropriate wording
for the auditor’s report.
Author’s Note
In December 2020 when Study Material was revised content of Risk Based Audit was changed,
conceptually it is almost same. Answer given above is as per recent Study Material & it may not match
exactly as per NOV 20 exam Suggested Answer.

QNO Steps in RAP Old Course – (SM17)
163.000 TITANIUM CNO—MRI.200
Briefly describe the various stages of a Risk Assessment process
Answer Risk Assessment
The risk assessment phase of the audit involves the following steps:

• Acceptance or Continuance
Performing client acceptance or continuance procedures.
• Planning
Planning the overall engagement.
• Understanding Business
Performing risk assessment procedures to understand the business and identify
inherent and control risks.
• Relevant Controls
Identifying relevant internal control procedures and assessing their design and
implementation (those controls that would prevent material misstatements from
occurring or detect and correct misstatements after they have occurred).
• Financial Statement Level Vs Assertion Level

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