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As per Chap. 7, we assess the risk before we accept an engagement as a part of acceptance procedure.
And as per chapter 8, (overview chart) we assess the risk after planning stage, which happens only after we have accepted the engagement.
So does this mean we do the risk assessment twice?
Also, if we assess the risk after planning stage and after understanding the entity, then this would mean that our planning must not have incorporated the risky areas to cover and hence we will have to ammend our plan to focus our attention on areas which are more risky, isn’t it?
The risk assessed before the engagement is primarily about whether you want the client at all or whether you would rather not be associated. You also have to assess whether you could competently perform the audit eg required expertise.
The risk assessed after accepting the audit is more detailed. Essentially looking at each item in the FS, assessing the likelihood of material misstatement and responding to that risk. This assessment is at the planning stage.
If additional risks are found as the audit progresses the plan would have to change.