Page 95 - AAA Integrated Workbook STUDENT S18-J19

Planning, materiality and assessing the risk of material misstatement

Risk assessment procedures

2.1 Risk assessment procedures

 Enquiries with management, of appropriate individuals within the internal audit
function (if there is one), and others (with relevant information) within the client
entity (e.g. about external and internal changes the company has experienced).

 Analytical procedures to identify trends/relationships that are inconsistent with
other relevant information or the auditor's understanding of the business.

 Observation (e.g. of control procedures).

 Inspection (e.g. of key strategic documents and procedural manuals).

2.2 Analytical procedures at the planning stage

Analytical procedures involve analysis of plausible relationships among financial and
non-financial data.

At the planning stage analytical procedures may be performed using management
accounts or the draft financial statements if available.

Analytical procedures will be useful at the planning stage to help identify unusual
fluctuations or balances which are not consistent with the auditor’s expectation.
These areas indicate risks of material misstatement.

In the exam you may be provided with financial information and be expected to
perform analytical procedures as part of your risk assessment.

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