Page 113 - Auditing Standards

As of December 15, 2017
relevant knowledge possessed by the auditor. In an integrated audit of financial statements and

internal control over financial reporting, AS 2201 14 describes the auditor's responsibility for
evaluating the control environment.

.25 If the auditor identifies a control deficiency 15 in the company's control environment, the auditor should

evaluate the extent to which this control deficiency is indicative of a fraud risk factor, as discussed in
paragraphs .65-.66 of this standard.

The Company's Risk Assessment Process

.26 The auditor should obtain an understanding of management's process for:

a. Identifying risks relevant to financial reporting objectives, including risks of material misstatement due
to fraud ("fraud risks");

b. Assessing the likelihood and significance of misstatements resulting from those risks; and

c. Deciding about actions to address those risks.

.27 Obtaining an understanding of the company's risk assessment process includes obtaining an

understanding of the risks of material misstatement identified and assessed by management and the actions
taken to address those risks.

Information and Communication

.28 Information System Relevant to Financial Reporting. The auditor should obtain an understanding of
the information system, including the related business processes, relevant to financial reporting, including:

a. The classes of transactions in the company's operations that are significant to the financial
statements;

b. The procedures, within both automated and manual systems, by which those transactions are
initiated, authorized, processed, recorded, and reported;

c. The related accounting records, supporting information, and specific accounts in the financial

statements that are used to initiate, authorize, process, and record transactions;

d. How the information system captures events and conditions, other than transactions, 16 that are
significant to the financial statements; and

e. The period-end financial reporting process.

Note: Appendix B discusses additional considerations regarding manual and automated

systems and controls.

110