Page 81 - CA Inter Bhaskar Vol 1

CA RAVI TAORI The auditor shall obtain an understanding of the following:
RISK ASSESSMENT AND INTERNAL CONTROL
AUDIT BHASKAR CH 03 - PART 01 (a) Relevant industry, regulatory, and other external factors including the applicable financial
Obtain
Understanding

reporting framework.

(b) The nature of the entity, including:
(i) its operations;
(ii) its ownership and governance structures;
(iii) the types of investments that the entity is making and plans to make, including
investments in special-purpose entities; and
(iv) the way that the entity is structured and how it is financed;
to enable the auditor to understand the classes of transactions, account balances, and
disclosures to be expected in the financial statements.

(c) The entity's selection and application of accounting policies, including the reasons for
changes thereto. The auditor shall evaluate whether the entity's accounting policies are
appropriate for its business and consistent with the applicable financial reporting framework
and accounting policies used in the relevant industry.

(d) The entity's objectives and strategies, and those related business risks that may result in risks
of material misstatement.

(e) The measurement and review of the entity's financial performance.

Chart of Product
Industry & Price
Related Points Industry E.g., Competitive Environment Includes Demand
Cyclical/Seasonal
Capacity
Regulatory Requirement E.g., Effect of Regulations
Technological Developments
Other External Factors
(Including Applicable Financial E.g., Energy Supply & Cost
Reporting Framework)
Supplier & Customer Relationship

Related Parties Unified Buying Groups

Industry & Points
Related Points Relevant industry, regulatory, and other external factors including the applicable financial
(QNO--315.08) reporting framework.

Example
1. Industry Conditions
Assess the competitive environment, supplier and customer relationships, and product
technology.
Determine if the entity is engaged in seasonal activities that affect financial performance.
Evaluate industry-specific risks that may lead to material misstatements, such as high
regulation or rapid technological change.

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