Page 77 - CA Inter Bhaskar Vol 1

CA RAVI TAORI RISK ASSESSMENT AND INTERNAL CONTROL

AUDIT BHASKAR CH 03 - PART 01 Chart Definition Shall Include Inquiry To identify &
(QNO-315.06.20)
(CNO--SA315-P1.040) RISK ASSESSMENT PROCEDURE (How to collect information?)
(MCQ-315.7, Incs.23.4, Incs.67.4)

Entity & Environment
To obtain
understanding
assess RMM
Including ICS
Observation & Inspection
Analytical Procedures

Inquiry
10 Further detailed discussion of risk assessment procedure given above
Shortcut As per the importance with respect to entity
TCWG Helps auditor to understand the environment in which
FST are prepared

Identify & Inquire With people given responsibility of risk
Mgt management within the entity if working fine, it will be helpful to
identify operational & regulatory risk

Understand design & effectiveness of internal control system
Internal Audit
personnel Whether management has responded to findings of internal
auditor
Inhouse legal counsel Understand the following

Law & Arrangement with business Other
regulation partners (such as JV) Contractual terms Litigations
Understand system changes, system
Information system personnel
controls, failures & its related risk
Marketing strategies, contractual,
Marketing & sales personnel
arrangement with customer, sales trend
Inquire with employees involve in initiating, processing,
Employees
recording complex & unusual Transaction
Analytical procedures
Collect both financial & non-financial data. For Ex. Sales & square foot of
sales, square footage of selling space, quantity of goods sold etc.

Computing ratios, percentage, graphs & comparing them may help auditor
unusual & unexpected relationship
If analytical procedures are performed on aggregate data at high level then
it may provide indication of material misstatement.

It may give auditor new information which he was not aware about.
Results of analytical procedures will be useful if it is consistent with
evidence from other audit procedure
Observation & Inspection

Visit premises & plant facility
Observation
See operations
Inspect documents, record, internal control manual
Inspection
Read reports prepared by management & TCWG

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