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“There is also a risk relating to DISCLOSURE, as assets and liabilities held for sale should be recognised separately from other assets and liabilities in the statement of financial position, and if they have not been appropriately reclassified, then non?current assets and liabilities will be overstated.”
maam won’t this be a risk relating to PRESENTATION of SFP?
In AAA you aren’t expected to identify/reference/state every assertion (as is expected in AA). As you should now be able to appreciate from the example you have given, “the risk” relating to disclosure not only affects the assertion of presentation, but also classification and valuation.
also ma’am in this question there are several instances like the one I have cited above where the audit risks are not exactly relating to disclosures but relating amount, presentation or classification. How can the examiner himself go against the requirements of question, which states that “evaluate audit risk relating to DISCLOSURES”?
the first time I saw the question I was terrified at the prospect of coming up with 8 audit risks all relating to “risk of disclosures” but then the examiner seems to have just broken the rule of following the requirement!
specific instances of rule breaking:
-assets HFS may continued to have been depreciated
-may not have been reviewed for impairment pre-classification as HFS
-$43capex capitalised as PPE instead of being allocated respective amounts to IA and PPEnow none of the above instances relate to disclosures being inaccurate/incomplete, so I wouldn’t have written them, despite being aware of them!
You are misinterpreting the requirement:
(a) Evaluate the significant audit risks to be considered in planning the Group audit for the financial year ending 30 September 20X5 …. THIS IS THE MAIN REQUIREMENT …
Given the planned Group restructuring, you should evaluate audit risks relating to disclosure
issues at this stage in the audit planning…. DOESN’T MEAN THAT ALL THE SIGNIFICANT RISKS ARE TO BE RELATED TO DISCLOSURE – only that you should consider those that are relevant. (In a different Q the examiner may say to IGNORE disclosure risks at the planning stage because they will be considered later.)PLEASE look AGAIN at the two half pages of assertions as summarised in Chapter 16 of AA:
2. ….and related disclosures
3. … and related disclosures
It is the risks associated with these that the examiner may specify that you include or ignore.
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