The spectrum of inherent risk

14 April 2022
Auditing and Assurance
South African Accounting Academy

ISA 315 (Revised) Identifying and Assessing Risks of Material Misstatement which is effective for periods beginning on/after 15 December 2021, and has definitely dished out some food for thought.

The spectrum of inherent risk is a new concept introduced into the standard, which provides us with a quantification of sorts around the scale of a particular inherent risk. This article looks at significant risk versus risk of material misstatement versus risk of misstatement.

Overall, the spectrum of inherent risk and consideration of significant risk results in a more granular risk assessment process and approach to assessing inherent risk which in turn allows for more focused and enhanced responses to the risks identified.

Click here to access the Article:

https://www.saica.org.za/resources/119817

Relevance to Auditors, Independent Reviewers & Accountants:

As an auditor and independent reviewer, you need to identify and assess the risks of material misstatement through understanding the entity and its environment (as per ISA 315 (Revised)) (in order to comply with International Standards on Auditing and other Assurance Services), and thus you need knowledge of the spectrum of inherent risk.

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