Documentation on identification and assessment of the risk of material misstatement.


 Identification and assessment the risk of material misstatement is important part of audit process. This is necessary to provide a basis for designing and implementing responses (audit procedures) to the assessed risks of material misstatement.

The work performed by auditors to identify and assess the risk of material misstatement is usually documented in audit documents.


The matters relating to the identification and assessment the risk of material misstatement which should be included in audit documentation listed below:

·        The discussion taken place among the engagement team and the significant decisions reached.

·        The key elements of understanding the entity and its environment and the Applicable Financial Reporting Framework.

·        The key elements of understanding and evaluating of the control environment relevant to the preparation of the financial statements.

·        The key elements of understanding and evaluating of the entity’s risk assessment process relevant to the preparation of the financial statement.

·        The key elements of an understanding and evaluating of the entity’s process for monitoring the system of internal control relevant to the preparation of the financial statements.

·        The key elements of understanding and evaluating of the entity’s information system and communication relevant to the preparation of the financial statements.

·        the sources of information from which the auditor’s understanding was obtained and the risk assessment procedures performed.

·        Evaluation of the identified control activities and determination whether such control has been implemented.

·        The identified and assessed risks of material misstatement at the financial statement level and at the assertion level, including significant risks.


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