Audit Risk Assessment: Financial Statement Analysis and Reporting

This report provides an in-depth analysis of audit risk assessment within the context of financial statements. It explores the application of audit procedures, including the evaluation of internal controls and the use of analytical review techniques. The report emphasizes the importance of understanding the nature of a business and its potential impact on audit risk, including the assessment of inherent, control, and detection risks. The report also highlights the significance of profitability and efficiency ratios in identifying potential misstatements. The document follows auditing standards and incorporates risk assessment steps, such as audit planning and financial statement reviews. It also considers the overall risk and its impact on the audit process.

Altium Limited Audit
RISK ASSESSMENT FOR THE NEW CLIENT

Auditing standards
 Auditing and Assurance Standards Board in Australia have issued
applicable auditing standards to be followed. Following auditing
standards must be followed in risk assessment in an audit of financial
statements.
 ASA 300.
 ASA 315.
 ASA 330.

Risk assessment
Steps to be followed:
I. Audit planning.
II. Inheritance risk assessment.
III. Detection risk assessment.
IV. Control risk assessment.
V. Financial statements review.
VI. Analytical review (Glover, 2015).

Analytical review procedure
 Analytical review process include conducting ratio analysis on the
financial statements of the company. Ratios will help in identifying
possible areas of material misstatement.
 Profitability ratios.
 Efficiency ratios.
 Liquidity ratios and
 Solvency ratios.

Risk in relation to the nature of
business:
 The associated risk in a business is mainly manifested from the nature
of the business. The auditor shall have a basic idea about the financial
transactions and account balances from the nature of a business of an
organization (Farrar, 2017).
 Overall risk of the audit must be below the limit of risk ceiling, i.e.
Overall risk (Inheritance risk detection risk x control risk) < risk limit.

References
 Farrar, F. (2017). Role and Function of the Public Company Accounting
Oversight Board and Auditing Standard No. 5 an Audit Internal Control
Over Financial Reporting that Integrated with an Audit of Financial
Statements. SSRN Electronic Journal, 2(2), 123-221. doi:
10.2139/ssrn.1564410
 Glover, J. (2015). Discussion—A Model of Auditing Under Bright-Line
Accounting Standards. Journal Of Accounting, Auditing &
Finance, 17(3), 561-564. doi: 10.1177/0148558x0401900412