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JOBNAME: 5843-McGraw-DownsBow PAGE: 3 SESS: 60 OUTPUT: Thu Dec 10 11:21:28 2009 SUM: 5874E174 /production/mcgraw-hill/booksxml/eilifsen/chap03 3 Risk Assessment and Materiality r rr r L EARNING O BJECTIVES Upon completion of this chapter you will ◆ ◆◆ ◆ LO1 Understand the concept of audit risk. ◆ ◆◆ ◆ LO2 Learn the form and components of the audit risk model. ◆ ◆◆ ◆ LO3 Understand how to use the audit risk model. ◆ ◆◆ ◆ LO4 Learn the limitations of the audit risk model. ◆ ◆◆ ◆ LO5 Understand the auditor’s risk assessment process. ◆ ◆◆ ◆ LO6 Know the factors that determine the auditor’s assessment of the risk of material misstatement. ◆ ◆◆ ◆ LO7 Learn how to respond to the results of the risk assessments. ◆ ◆◆ ◆ LO8 Learn how to evaluate the results of the audit tests. ◆ ◆◆ ◆ LO9 Understand the documentation requirements for risk assessments and responses. ◆ ◆◆ ◆ LO10 Learn the auditor’s communication requirements to management, those charged with governance and others. ◆ ◆◆ ◆ LO11 Understand the concept of materiality. ◆ ◆◆ ◆ LO12 Know the steps to applying materiality in an audit. ◆ ◆◆ ◆ LO13 Apply the materiality steps to an example (EarthWear). ◆ ◆◆ ◆ LO14 Understand how to audit accounting estimates, including fair value accounting estimates and related disclosures. Kerrypress Ltd – Typeset in XML A Division: chap03 F Sequential 3
JOBNAME: 5843-McGraw-DownsBow PAGE: 4 SESS: 60 OUTPUT: Thu Dec 10 11:21:28 2009 SUM: 82F9586C /production/mcgraw-hill/booksxml/eilifsen/chap03 r rr r R ELEVANT A CCOUNTING AND A UDITING P RONOUNCEMENTS IASB, IAS 1, Presentation of Financial Statements IASB, IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements ISA 250, Consideration of Laws and Regulations in an Audit of Financial Statements ISA 260, Communication with Those Charged with Governance ISA 300, Planning an Audit of Financial Statements ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment ISA 320, Materiality in Planning and Performing an Audit ISA 330, The Auditor’s Responses to Assessed Risks ISA 450, Evaluation of Misstatements Identified during the Audit ISA 500, Audit Evidence ISA 530, Audit Sampling ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures ISA 580, Written Representations ISA 700, Forming an Opinion and Reporting on Financial Statements IN CHAPTER 1 the three fundamental concepts that underlie the conduct of a financial statement audit were briefly discussed. This chapter provides detailed coverage of two of those concepts: audit risk
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