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AuditEssential

Step 2 – Risk Assessment

The second step in completing an engagement is to assess how the risks that you identified when completing the planning forms in Step 1 affect the audit procedures you will perform.
Each audit area is represented by an Assess Effects of Risks window that displays the identified risks organized by organized by relevant assertions.
Notice that there are several context-sensitive Help links on this window identified in blue, underlined text. Click these links to see a Help topic that describes or defines the term.
As you complete each audit area's risk assessment, click
Next
 to move to the next audit area.
To complete the risk assessment for each audit area:
  1. Select
    Yes
     or
    No
     to indicate whether the audit area is significant.
  2. Select
    Yes
     or
    No
     to indicate whether or not you plan to test controls.
  3. In the table included in question 3, consider identified risks and assess
    Inherent Risk
     and
    Control Risk
     for each assertion by selecting
    Low
    ,
    Moderate
    ,
    High
    , or
    Not Relevant
     from the drop-down list.
    Assessed Risk of Material Misstatement
     is computed for you in the last column. You can override this by selecting a different risk level, but it is recommended that you use the calculated risk level.
    Your assessed risk of material misstatement should be documented in the comments.
    note
    You have the option to add a comment to any assertion. A comment icon appears to the right of the
    Assessed Risk of Material Misstatement
     column for each assertion. Clicking the icon opens the
    Comments
     window, where you can add a comment.
  4. Based on your answers to questions 1 and 2 and your risk assessments in the table in question 3, an audit approach will be suggested. Accept the suggested approach or choose a different one based on your audit judgment.
    note
    Refer to the Audit Approach topic, which describes the important definitions of limited, basic, and extended approach.
  5. After you finish the audit areas, click
    Next
     to go to the
    Overall Financial Statement
     form.

Overall Financial Statement Risks

In the Overall Financial Statement risks form, review the planned audit response to identified risks and make changes if applicable.
All risks identified as affecting the financial statement in general are listed in the
Identified Risks
 field. For the risk management override of controls, a response is provided. You can edit the planned audit response text, add procedures/comments, or make changes to the text as needed.

Complete Step 2

When you complete all audit areas and the
Overall Financial Statement
 risks form, click
Next
 to move to Step 3 – Audit Program Preparation.