Objective
To identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels.
Key requirements
- Understanding the entity and its environment (industry, regulatory factors, ownership)
- Understanding the entity's system of internal control — five components
- Identification of significant risks (those requiring special audit consideration)
- Linkage of risks to assertions and to planned audit responses
- Engagement team discussion on susceptibility of FS to misstatement
Typical procedures
- Risk register documenting identified ROMMs at assertion level
- Walkthroughs of significant transaction processes
- Inquiry of management and TCWG
- Analytical procedures at planning
Common pitfalls
- Cookie-cutter risk register copied from prior year without update
- Significant risks not separately identified or specifically responded to
- Walkthrough notes too thin to support the control reliance decision
SA 315 in practice
SA 315 sits in the Risk Assessment phase of the audit. The Standards on Auditing are issued by the ICAI Auditing and Assurance Standards Board (AASB) and deemed to be prescribed by the Central Government under Section 143(10) of the Companies Act 2013. Compliance with SAs is mandatory for every audit conducted by a Chartered Accountant in India.
For authoritative text, refer to the ICAI AASB Compendium of Standards on Auditing at icai.org.
