ii.Identify areas that might represent specific risks relevant to the audit, including the existence of unusual transactions and events, and amounts, ratios, and trends that warrant investigation
3. AS 12 - Identify the 6 steps the auditor should perform to identify and assess the risks of
4.
AS 12 - What are the factors to be considered in determining whether an account or
disclosure is “significant”
or whether an assertion is “relevant?”
The factors to be considered in determining whether an account or disclosure is
“significant” or whether an assertion is “relevant” include:
Size and composition of the account;
Susceptibility to misstatement due to error or fraud;
Volume of activity, complexity, and homogeneity of the individual transactions
processed through the account or reflected in the disclosure;
Nature of the account or disclosure;
Accounting and reporting complexities associated with the account or disclosure;
Exposure to losses in the account;
Possibility of significant contingent liabilities arising from the activities reflected in
the account or disclosure;
Existence of related party transactions in the account; and
Changes from the prior period in account and disclosure characteristics.
