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Please access PCAOB Auditing Standard No. 12 "Identifying and Assessing Risks of Material Misstatements" (pcaobus.org). Use...

Please access PCAOB Auditing Standard No. 12 "Identifying and Assessing Risks of Material Misstatements" (pcaobus.org). Use this standard to answer each of the questions below. For each answer, document the paragraph(s) in AS No. 12 supporting your answer.

a. What types of information does AS No. 12 suggest the auditor should consider when obtaining an understanding of the company and its environment?

b. What types of performance measurements might affect the risk of material misstatement?

c. What specific issues should be included in the discussion among engagement team members regarding the risk of material misstatement?

d. What factors should the auditor consider to determine if a risk is a "significant risk"?

e. What guidance is provided about revising the risk assessment as the audit continues?

Solutions

Expert Solution

Ans A

Introduction

1. This standard establishes requirements regarding the process of identifying and assessing risks of material misstatement1/ of the financial statements

2. Paragraphs 4-58 of this standard discuss the auditor's responsibilities for performing risk assessment procedures.2/ Paragraphs 59–73 of this standard discuss identifying and assessing the risks of material misstatement using information obtained from performing risk assessment procedure

Objecti

3. The objective of the auditor is to identify and appropriately assess the risks of material misstatement, thereby providing a basis for designing and implementing responses to the risks of material misstatement.ves..

Ans B

The company's operating characteristics, including its size and complexity; Note: The size and complexity of a company might affect the risks of misstatement and how the company addresses those risks.

Ans C

The discussion among the audit team members about the susceptibility of the entity's financial statements to material misstatement due to fraud should include a consideration of the known external and internal factors affecting the entity that might (a) create incentives/pressures for management and others to commit ...

ekkarill92 answered 2 years ago
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