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

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PSA 315 Auditing Standards and Practices Council PHILIPPINE STANDARD ON AUDITING 315 UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT
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PHILIPPINE STANDARD ON AUDITING 315 PSA 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 Risk Assessment Procedures and Sources of Information About the Entity and Its Environment, Including Its Internal Control Risk Assessment Procedures Discussion Among the Engagement Team Understanding the Entity and Its Environment, Including Its Internal Control Industry, Regulatory and Other External Factors, Including the Applicable Financial Reporting Framework Nature of the Entity Objectives and Strategies and Related Business Risks 1–5 6 7-13 14-19 20-21 22-24 25-29 30-34 Measurement and Review of the Entity’s Financial Performance 35-40 Internal Control Assessing the Risks of Material Misstatement Significant Risks That Require Special Audit Consideration Risks for Which Substantive Procedures Alone Do Not Provide Sufficient Appropriate Audit Evidence Revision of Risk Assessment Communicating With Those Charged With Governance and Management Documentation Effective Date Acknowledgment 41-99 100-107 108-114 115-118 119 120-121 122-123 124 125-126
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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 PSA 315 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
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PSA 315 - PSA 315 Auditing Standards and Practices Council...

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