Question

Auditing standards require that the engagement team members engage in discussion about the risk of material misstatement. Explain the nature of the required discussion among the audit team and provide some relevant examples.

Answer 1

The engagement Team should hold discussions to gain a better understanding of the entity and it's Business environment , including internal control and also to assess the potential for material misstatement of the financial statements. Also all these discussions should be appropriately documented for future reference.

The discussion should be to identify the suspectible areas of material misstatement in the financial statements of the entity . These discussions are usually done on the planning stage of the audit. . These discussions enable the auditor to the delegate the works requiring the involvement of experienced team members and also the need to involve an specialist to certain audit areas.

Example : (1)the analytical procedures to be applied as risk assessment procedures.
2) The knowledge about entity's ownership structure whether is equity or debt financed.

3) whether there are items on which the attention of the users are focused like income statement , asset of entity etc

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