Beruflich Dokumente
Kultur Dokumente
Performance Support
Risks of Material Misstatement and Assertions
This performance support provides information on risks of material misstatement, which are
central to our audits; it also provides information on the assertions. While planning for the
testing of material classes of transactions, account balances, and disclosures, this information is
used in order to plan for and apply appropriate audit procedures.
This performance support will cover the following topics (click on a link to go to the topic):
WHY DO WE NEED TO KNOW ABOUT RISKS OF MATERIAL MISSTATEMENT
AND ASSERTIONS
RISKS OF MATERIAL MISSTATEMENT
o What is a risk of material misstatement?
o Do we seek to address risks in general or only those that would result in a material
misstatement?
o What is the process of identifying the risk of material misstatement?
o Where can we find the risk of material misstatement identified?
o Who identifies the risk of material misstatement?
WHY DO WE NEED TO KNOW ABOUT RISKS OF MATERIAL MISSTATEMENT AND
ASSERTIONS
The Audit Approach is a risk-based approach and as such, it is designed to focus on the risks of
material misstatement that are in the material classes of transactions, account balances, and
disclosures. A material class of transaction, account balance, or disclosure is one that we have
determined, using professional judgment, has a material impact on the financial statements, and
in turn affects our audit engagement.
We identify the risks of material misstatement by considering the different types of potential
misstatements that may occur, linking the risks of material misstatement to the applicable
assertions, and designing further audit procedures that are responsive to the assessed risks of
material misstatements. The purpose of a financial statement audit is to obtain reasonable
assurance that the financial statements are not materially misstated. If we know the risk of
material misstatement being tested, then we are aware of how misstatements can occur and can
perform further audit procedures to address the risks of material misstatement. Much of the
design of audit procedures happens during the planning of the audit. However, it is important to
know why we perform the tests we perform so that they are applied accurately, we know what to
Note that this performance support does not replace the AAM. It should be read in conjunction
with the applicable AAM topics, as the manual states the requirements of our audit approach and
it provides further guidance.