The auditor shall identify and assess the risks of material misstatement at:

  1. the financial statement level; and
  2. the assertion level for classes of transactions, account balances, and disclosures, to provide a basis for designing and performing further audit procedures.

For this purpose, the auditor shall:

  1. Identify risks throughout the process of obtaining an understanding of the entity and its environment, including relevant controls that relate to the risks, and by considering the classes of transactions, account balances, and disclosures in the financial statements;
  2. Assess the identified risks, and evaluate whether they relate more pervasively to the financial statements as a whole and potentially affect many assertions;
  3. Relate the identified risks to what can go wrong at the assertion level, taking account of relevant controls that the auditor intends to test; and
  4. Consider the likelihood of misstatement, including the possibility of multiple misstatements, and whether the potential misstatement is of a magnitude that could result in a material misstatement.

 

ISA 315 – Definitions

ISA 315 – Requirements

ISA 315 – The information system

ISA 315 – Control Activities Relevant to the Audit