Assertion
This query is : Resolved
24 December 2013
what is an assertion level of risk in risk of material misstatment ??? kindly explain with examples
24 December 2013
Assertion level risks are
risks that are limited to one or more specific
assertions in an account or in several
accounts, for example , the valuation of
inventory or the occurrence of sales. Assertion
level risks are addressed by the nature , timing,
and extent of further audit procedures , which
may include substantive procedures or a
combination of tests of controls and
substantive procedures . The risk of material
misstatement at the assertion level has two
components : Inherent Risk ( IR) , which is
the susceptibility of an assertion to a material
misstatement , assuming that there are no
related controls. Inherent risk is greater for
some assertions and related account balances ,
classes of transactions , and disclosures than
for others. Control Risk ( CR ) , which is the
risk that a material misstatement that could
occur in an assertion will not be prevented or
detected by the entity's internal control on
a timely basis . Control risk is a function of the
effectiveness of the design and operation of the
entity's internal control .
risks that are limited to one or more specific
assertions in an account or in several
accounts, for example , the valuation of
inventory or the occurrence of sales. Assertion
level risks are addressed by the nature , timing,
and extent of further audit procedures , which
may include substantive procedures or a
combination of tests of controls and
substantive procedures . The risk of material
misstatement at the assertion level has two
components : Inherent Risk ( IR) , which is
the susceptibility of an assertion to a material
misstatement , assuming that there are no
related controls. Inherent risk is greater for
some assertions and related account balances ,
classes of transactions , and disclosures than
for others. Control Risk ( CR ) , which is the
risk that a material misstatement that could
occur in an assertion will not be prevented or
detected by the entity's internal control on
a timely basis . Control risk is a function of the
effectiveness of the design and operation of the
entity's internal control .
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