ISA 315 ”identifying and assessing the risk of material misstatement through understanding the entity and its environment” requires from the auditor to identify and assess the risk of material misstatement, whether due to fraud or error, at the financial statement and assertion level, by performing risk assessment procedures.
Risk assessment procedures are audit procedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control, to identity and assess the risk of material misstatement whether due to fraud or error, at financial statement and assertion levels.
components of risk assessment procedures:
- Inquiries of management, and of others within the entity.
- Analytical procedures.
- Observation and inspection.