Page 80 - CA Inter Bhaskar Vol 1

RISK ASSESSMENT AND INTERNAL CONTROL CA RAVI TAORI

(CNO--SA315-P1.050) RISK ASSESSMENT PROCEDURE – USED AS AUDIT EVIDENCE AND RISK DUE TO ERROR & FRAUD
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USE OF INFO COLLECTED IN RAP

Primary use of info collected in RAP is to identify & assess risk
1) Primary Use
of material misstatement
This info can also be use in TOC to prove operation of controls AUDIT BHASKAR CH 03 - PART 01
2) Further Use
and also in SAP to prove TBD
Because of above, some auditor may plan to perform RAP, TOC,
3) Approach
SAP concurrently
E.g. When you visit plant
See if anything unusual For RAP
See if security is adequate For TOC
See if assets exist For SAP

Used as Information obtained by performing risk assessment procedures and related activities may be used by
Audit the auditor as audit evidence to support assessments of the risks of material misstatement. In addition,
Evidence the auditor may obtain audit evidence about classes of transactions, account balances, or disclosures and
related assertions and about the operating effectiveness of controls, even though such procedures were
not specifically planned as substantive procedures or as tests of controls. The auditor also may choose to
perform substantive procedures or tests of controls concurrently with risk assessment procedures
because it is efficient to do so.

(CNO--SA315-P1.060) UNDERSTANDING OF THE ENTITY AND ITS ENVIRONMENT (Which basic information
should be collected?) (QNO-315.07) (MCQ-Incs.85.3)

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1. Industry Related Industry
Regulatory Requirement

Other External Factors (Including Applicable
Financial Reporting Framework)
2. Nature of Entity & Ownership & Governance
Related Points
How entity is structured & financed

Types of Investments (Including investment
in special purpose entities)

Its operations
3. AP Related Points Selection of AP

Application of AP

Reason for change in AP
4. Financial Performance Related Measurement & Review

5. Objective & Strategy Related Objectives
Strategies

Related Business Risks

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