International Standards on Auditing 315

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INTERNATIONAL STANDARD ON AUDITING 315
IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL
MISSTATEMENT THROUGH UNDERSTANDING THE
ENTITY AND ITS ENVIRONMENT
(Effective for audits of financial statements for periods
beginning on or after December 15, 2009)
CONTENTS
Paragraph
Introduction
Scope of this ISA .................................................................................. 1 Effective Date ....................................................................................... 2 Objective .............................................................................................. 3 Definitions ............................................................................................ 4 Requirements

Risk Assessment Procedures and Related Activities ................................ 5-10 The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control ............................................ 11-24 Identifying and Assessing the Risks of Material Misstatement ............ 25-31 Documentation ...................................................................................... 32 Application and Other Explanatory Material

Risk Assessment Procedures and Related Activities ............................ A1-A16 The Required Understanding of the Entity and Its Environment, Including the Entity’s Internal Control ............................................ A17-A104 Identifying and Assessing the Risks of Material Misstatement ............ A105-A130 Documentation ...................................................................................... A131-A134 Appendix 1: Internal Control Components

Appendix 2: Conditions and Events That May Indicate Risks of Material Misstatement
IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT
ISA 315 272
International Standard on Auditing (ISA) 315, “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment” should be read in conjunction with ISA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing.”

IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT
273 ISA 315
AUDITING
Introduction
Scope of this ISA
1. This International Standard on Auditing (ISA) deals with the auditor’s responsibility to identify and assess the risks of material misstatement in the financial statements, through understanding the entity and its environment, including the entity’s internal control.

Effective Date
2. This ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009.
Objective
3. The objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels, through understanding the entity and its environment, including the entity’s internal control, thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement. Definitions

4. For purposes of the ISAs, the following terms have the meanings attributed below:
(a) Assertions – Representations by management, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur. (b) Business risk – A risk resulting from significant conditions, events, circumstances, actions or inactions that could adversely affect an entity’s ability to achieve its objectives and execute its strategies, or from the setting of inappropriate objectives and strategies. (c) Internal control – The process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity’s...
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