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Q1. Am I right to say that under SSA 240, when the risk of material misstatement due to fraud arises, if it is not related to revenue, we have to fully document it. If I am correct, why is it that revenue related fraud, we do not need to fully document it?
Q2. What does it mean by projected financial information? If possible, can you give an example?
Q3. The safeguards for high inherent risk would be to do more audit work and to recommend more controls to be in place?
Q4. Reperform management’s calculation means recalculate?
Q5. Am I correct to say that in order to find materiality, each item in income statement is divided by the PBIT figures and each item in financial position is divided by the total assets figures?
SSA 240?
Guessed / estimates of financial results of the future (like cash forecasts)
Where inherent risk is high, the auditor will need to reduce the detection risk in order to be able to reduce the overall audit risk. So, yes, do more audit work (as a result of reducing materiality levels) and, for the future reduction of risk, recommend the introduction of stronger controls today that will reduce risk tomorrow
Yes
Too simplistic, but generally the right idea
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