May 2021 Q1 b(iii)
To prepare an audit strategy and an audit plan, the Auditor will need to gain an understanding of the entity and its environment in accordance with ISA 315 “Identifying and assessing the risk and material misstatement through understanding the entity and its environment”.
Required:
iii) Define the concept of risk-based auditing. (3 marks)
View Solution
This is where Auditor will then focus his work on balances in the financial statements where he considers a material risk of misstatement. High-risk material items will be audited in detail, but low risk/ immaterial items will receive less attention.