Page 85 - Internal Auditing Standards

Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts

Use of Assertions Procedures
Assessing Risks The risk of material misstatement is a combination of inherent risk and control risk.
of Material The assessment process includes:
Misstatement • Inherent risk
Identify potential misstatements and the assertions involved, then assess the
likelihood of the risk’s occurrence and possible magnitude.

• Control risk
Identify and evaluate any relevant internal controls in place that mitigate the
assessed risks and address the underlying assertions.
Designing Audit The final step is to design audit procedures to be responsive to the assessed risks by

Procedures assertion. For example, if the risk is high that receivables are overstated (existence

assertion), the audit procedures should be designed to specifically address the
existence assertion. If sales completeness is a risk, the auditor can design a test of
controls that addresses the completeness assertion.

83