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Dear Sir,
I came across one of the questions, which was related to the interim audit and activities that could take place during this time.
The right answer was performing risk assessment procedures.
My understanding was that these procedures are performed much earlier, at the continuance/acceptance stage. The auditor accepts only clients and work of an acceptable level of risk. Thus the risk assessment procedures must be taken before the acceptance happens. Performing them during the interim audit is too late.Could you please clarify?
Thank you very much!
Risk must be continually reviewed by auditors. Yes, before acceptancemrisk is estimated, but oncemthe audit starts inevitably more will be discovered about the client. During the interim audit it is common to carry out internal control assessment and testing. If the auditor discovered that an important control was not working properly then risk of misstatement has increased and there would be implications for final audit work. Even close to the end of an audit, major problems can be found which will increase the risk of misstatement and which need to be responded to.
Thank you very much!
My understanding is that risk assessment includes: assessing the risk and responding to the risk assessed.
Since as clarified above risk must be continually reviewed by auditors – would it mean risk assessment procedures and responses to the assessed risk vary depending on the stage of an audit?The reason why I’m asking is that Kaplan book did confuse me a bit.
Following it – pages 144/145 say: response to assessed risk includes: review journal entries, review management estimates, review transactions outside the normal course of business and obtain written representations from management (ISA 240) while page 453 says: test of controls and substantive procedures (ISA 330).Maybe in other words: what is the difference between ISA 240, ISA 315 and ISA 330? Is risk being assessed and responded differently in each case?
Thank you!
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