PSA-315 - PSA 315 Auditing Standards and Practices Council...

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PHILIPPINE STANDARD ON AUDITING 315 UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT Auditing Standards and Practices Council
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PSA 315 PHILIPPINE STANDARD ON AUDITING 315 UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT (Effective for audits of financial statements for periods beginning on or after December 15, 2004) CONTENTS Paragraphs Introduction 1–5 Risk Assessment Procedures and Sources of Information About the Entity and Its Environment, Including Its Internal Control 6 Risk Assessment Procedures 7-13 Discussion Among the Engagement Team 14-19 Understanding the Entity and Its Environment, Including Its Internal Control 20-21 Industry, Regulatory and Other External Factors, Including the Applicable Financial Reporting Framework 22-24 Nature of the Entity 25-29 Objectives and Strategies and Related Business Risks 30-34 Measurement and Review of the Entity’s Financial Performance 35-40 Internal Control 41-99 Assessing the Risks of Material Misstatement 100-107 Significant Risks That Require Special Audit Consideration 108-114 Risks for Which Substantive Procedures Alone Do Not Provide Sufficient Appropriate Audit Evidence 115-118 Revision of Risk Assessment 119 Communicating With Those Charged With Governance and Management 120-121 Documentation 122-123 Effective Date 124 Acknowledgment 125-126
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PSA 315 Appendix 1: Understanding the Entity and Its Environment Appendix 2: Internal Control Components Appendix 3: Conditions and Events That May Indicate Risks of Material Misstatement Philippine Standard on Auditing (PSA) 315, “Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement,” should be read in the context of the “Preface to the Philippine Standards on Quality Control, Auditing, Review, Other Assurance and Related Services,” which sets out the application and authority of PSAs.
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PSA 315 UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT Introduction 1. The purpose of this Philippine Standard on Auditing (PSA) is to establish standards and to provide guidance on obtaining an understanding of the entity and its environment, including its internal control, and on assessing the risks of material misstatement in a financial statement audit. The importance of the auditor’s risk assessment as a basis for further audit procedures is discussed in the explanation of audit risk in PSA 200, “Objective and General Principles Governing an Audit of Financial Statements.” 2. The auditor should obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures. PSA 500, “Audit Evidence,” requires the auditor to use assertions in sufficient detail to form a basis for the assessment of risks of material misstatement and the design and performance of further audit procedures. This
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PSA-315 - PSA 315 Auditing Standards and Practices Council...

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