An examination of the causes of the high risk of material misstatement in intel

Management override of controls significant risk

In relation to control activities, the ISA specifically states that 'an audit does not require an understanding of all of the control activities related to each significant class of transaction, account balance and disclosure in the financial statements or to every assertion in them'. The key elements of the business understanding obtained regarding each of the aspects outlined above must be documented ISA In preparing the standalone financial statements, Management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards. We describe these matters in our auditors'' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Auditors'' responsibilities for the audit of the standalone financial statements Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditors'' report that includes our opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. Obtaining and documenting an understanding of the entity Without an in-depth understanding of the audited entity, it is impossible to properly assess the risk of material misstatement. Internal Control It is a specific requirement of ISA that the auditor obtains an understanding of the internal control relevant to the audit. Before discussing how auditors should assess the risk of material misstatement, it is important to consider what is meant by 'misstatement'. But, it is important to remember that it is only required that the auditor understands and documents those elements of internal control which are relevant to the audit, in particular to the auditor's risk assessment, which is a matter of professional judgment.

We are independent of the Company in accordance with the ''Code of Ethics'' issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics.

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when responding to significant risks the auditor

The key elements of the business understanding obtained regarding each of the aspects outlined above must be documented ISA Continual revision of risk assessment The risk assessment outlined above takes place in the planning phase of the audit. However, the ISA does not stipulate a method or level of detail required for this documentation, leaving it to the auditor's judgment to determine the extent of documentation needed.

As 2301 paragraph 47

Internal control has five components, each of which must be understood and documented by the auditor: the control environment the entity's risk assessment procedure the information system, including the related business processes, relevant to financial reporting and communication control activities, and monitoring of controls. Key audit matters How our audit addressed the key audit matter Accounting for investments as described in note 5 of the standalone financial statements The Company has investments aggregating Rs 17, Related topics. What is a 'misstatement'? Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements for the financial year ended 31 March 9 and are therefore the key audit matters. Report on other legal and regulatory requirements 1. ISA It is a matter of judgment as to whether a risk constitutes a significant risk, and matters such as the complexity of the transaction, whether there is a risk of fraud, the involvement of related parties, and whether the transaction is outside the normal course of business should be considered. Responsibilities of management for the standalone financial statements The Company''s Board of Directors is responsible for the matters stated in section 1 34 5 of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards Ind AS specified under section 1 33 of the Act read with the Companies Indian Accounting Standards Rules, 5, as amended. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 3, as amended ''the Act1 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 9, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. Auditors'' responsibilities for the audit of the standalone financial statements Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditors'' report that includes our opinion.

As required by the Companies Auditor''s Report Order, ''the Order''issued by the Central Government of India in terms of sub-section 11 of section 1 43 of the Act, we give in the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.

financial statement level risk examples

The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Note 32 c to the standalone financial statements; iii. A30 Therefore, to successfully identify risks of material misstatement, the auditor should use a business risk approach.

ISA requires that the engagement partner and other key engagement team members discuss the susceptibility of the entity's financial statements to material misstatement, and that the engagement partner determines which matters are to be communicated to the rest of the audit team.

Risk assessment procedures

The discussion should place emphasis on any indicators that the financial statements may be at risk of material misstatement due to fraud. Misstatements can be factual, in the case of a clear breach of a requirement of a financial reporting standard, or could be judgmental, arising from unsuitable estimation techniques or the selection of inappropriate accounting policies. These matters were addressed in the context of our audit of the standalone financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. What is a 'misstatement'? If the auditor plans to rely on controls over a significant risk, the controls must be tested in the current period, and substantive procedures should be performed in response to significant risks at the assertion level. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 3, as amended ''the Act1 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 9, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date. In a smaller entity, the audit documentation on internal control is likely to be relatively simple, focusing on how sales and purchasing cycles operate and highlighting the risks of material misstatement that arise from the controls or lack of that are in place. We describe these matters in our auditors'' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements for the financial year ended 31 March 9 and are therefore the key audit matters. ISA requires that the auditor obtains an understanding relating to five aspects of the audited entity: relevant industry, regulatory and other external factors including the applicable financial reporting framework the nature of the entity including its operations, its ownership and governance structures, the types of investments it makes, and the way the entity is structured and financed the entity's selection and application of accounting policies the entity's objectives and strategies, and business risks that may result in risks of material misstatement, and the measurement and review of the entity's financial performance. Studying this technical article and answering the related questions can count towards your verifiable CPD if you are following the unit route to CPD and the content is relevant to your learning and development needs.

This is a crucial step in assessing the risk of material misstatement, as one of the components of audit risk is control risk, defined as the risk that a misstatement that could occur will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.

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Auditing Standard No. 8