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Dear sir what steps should I follow for an audit risk question so that I can include over/understatement as well?
I mean to say when I find an audit risk in a question what steps/formate should I follow to explain the risk in writing?
Standard explanation , risk discussion and it’s impact(over/understatement )It’s certainly a good idea to explain it in writing … any attempt to explain it in pictures would not be as successful!
Identify the risk
Explain how / why it’s a risk
Expand to detail the potential consequences if that risk were to crystallise
Quantify … if possible, although that quantification could be a major problem. I think that you would have to talk in generalities, something like:
“If the risk were to crystallise the effect on revenue would most probably be so material as to put the future viability of the entity in doubt”
But trying to put a $ value on it could prove to be impossible
OK?
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