S 315: Identification and Understanding

Introduction

• Practice Series: Detailed video series for CA Intermediate Audit
• Current Discussion: S 315 - Identification and Understanding Entity and its Environment

Coverage So Far

• Chapters 1, 11, 6, 7, 8, 2 have been covered.
• Discussion on SA 210, SQC 1, SA 220, 230, 260, 265, 299, Audit Strategy Planning and Audit Program.

Current Discussion

• SA 315: Understanding Entity and Its Environment
• Main Objective: Identify and assess the risk of material misstatement

Key Terms

• Risk of Material Misstatement: Inherent risk, control risk, detection risk
• Risk Assessment Procedure: Assessing risk through understanding entity and environment

Procedure and Objective

• Objective: Identification of risk of material misstatement
• Contents: Separate study on inherent risk, control risk, detection risk

Included in Risk Assessment Procedure

• Inquiry, analytical procedures, observation, and inspection
• Inquiry: Management, sales personnel, information systems personnel, risk management personnel, in-house legal counsel, internal audit personnel

S 320: Materiality

Objective

• Materiality: Definition of material misstatements and its impact
• Professional Judgment: Determination of materiality

Determination of Materiality

• Benchmark: Profit, revenue, assets
• Factors: Nature of entity, elements of financial statements, user attention

Performance Materiality

• Purpose: Manage aggregate uncorrected misstatements
• Situation: Revision of materiality

Reporting

• Documentation: Risk, misstatements, materiality

S 330: Auditor Response to Assessed Risk

Objective

• Risk Response: Test of controls, substantive procedures

Procedures

• Test of Controls: Testing operating effectiveness
• Substantive Procedures: Detection of material misstatements

Conclusion

• Importance of Audit: Proper implementation of procedures
• Further Audit Procedures: Test of details, substantive analytical procedures
• Documentation and Reporting: Ongoing process

Note: These video lectures cover the audit section for CA Intermediate extensively. Question bank and test series are coming soon.