Page 86 - CA Inter Bhaskar Vol 1

RISK ASSESSMENT AND INTERNAL CONTROL CA RAVI TAORI

(CNO-SA315-P1.100) IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT (MCQ-315.15 , 315.27)
Chart FST Level
(MCQ-315.31, Assessed 2 levels
315.32, 315.29, Assertion Level
315.30, Audit procedure for IA- RMM
Incs.76.3, 1 4
Incs.83. 2) Identify risks 2 Assertion Level Likelihood AUDIT BHASKAR CH 03 - PART 01
&
throughout the Relate risks Magnitude
process of RAP FST Level of MMST
(Pervasive)
3
RMM at 2 Levels The auditor shall identify and assess the risks of material misstatement at:
(QNO-315.05, The financial statement level; and
315.15) The assertion level for classes of transactions, account balances, and disclosures to provide a basis
(MCQ-315.25) for designing and performing further audit procedures.
For this purpose, the auditor shall:
Identify risks throughout the process of obtaining an understanding of the entity and its
environment, including relevant controls that relate to the risks, and by considering the classes of
transactions, account balances, and disclosures in the 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 f nancial i
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)

Example only for reference no need to include in answer

Risk Assessment State of State of Ownership & Governance
Procedure (RAP) Economy Economy (80% of shares belong to
(Downturn in (Downturn in one family + Family
Economy) Economy) Management + Past
History of Manipulation)

1. Identity Risk Difficult to Inventory may There are chances that some
collect remain unsold related party transactions
Receivables are manipulated to increase
profits.
2. Assertion Level Risk / Valuation Valuation Anywhere in financial
FST Level Risk statements
3. Probability (Points) 5 6 8

Amount (Points) 2 4 5
Combined Effect 10 24 40
High RMM
No Yes Yes
(Above 20 High RMM)

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