Understanding ASA 315: Identifying and Assessing Risks of Material Misstatement

Running Head: AUDITING
AUDITING
Name of the Student
Name of the University
Author Note

AUDITING1
Introduction
Auditing Standard ASA 315 refers to identification and assessment of the risks of
material misstatement through understanding the entity and its environment. Material
misstatement reflects any errors or omissions done in an entity’s financial report (Lutui &
Ahokovi 2018). The study aims to understand the concept, process and applications of ASA
315 in detail. Further, it has considered the revised document of Auditing Standard.
The Auditing and Assurance Standards Board (AUASB) has made the ASA 315
auditing standard in the year 2009 (Legislation.gov.au 2019). Various amendments have done
in ASA 315 by AUASB up to 1 December 2015 that has discussed accordingly in many
points under this study. The ASA 315 has increased the efficiency of a proper audit.
Scope
The ASA 315 deals with the responsibility of an auditor. It suggests them in
identifying the risks related to a material misstatement in the financial report and assess it
through proper understanding an entity and its environment.
Objective
The auditor has to identify the risk which is associated with the company and should
carry specific procedure to minimize the effect of the same in the financial report.
(Legislation.gov.au 2019).
Definitions (4)
Some terms have a specific meaning mentioned in point 4 for Auditing Standard that
has discussed below:

AUDITING2
 Assertions- It refers to those representations made by the management or accountant
which is there in the financial report that can used by the auditor, considering that
potential misstatement may occur (Wijesinghe 2015).
 Business risk- A risk is resulting from any events or occurrence that affects the
strategies and the ability of an entity to achieve its objectives.
 Internal control- The process which has been designed, maintained and implemented
to assure an entity can achieve its objectives concerning the secured financial
reporting, operations effectiveness and efficiency by following the required laws and
regulations (Contessotto & Moroney 2014).
 Risk assessment procedures- This means a method to perform an audit through
having an understanding of an entity and its environment along with the internal
control, also to identify all the risks and material misstatement in the financial report
and assertions.
Requirement
 Risk Assessment Procedures
1. The risk assessment procedure is a process for the effective performance of the audit
by identifying and assessing the risk (Sanderson 2014). Following are the points
included under it:
i. As per para. A9-A13, the auditor may find the required information within the
Entity through enquiring appropriate individuals that helps them to understand the
environment of the Entity and identifying certain risks occurrence due to any
fraud or error. It helps the auditor in representing a useful financial report of an
entity and audit.
ii. Analytical Procedure (Paragraph A14-A17) states that the procedure follows by an
auditor to find out the risk that is unknown to them. It may be the internal issue of