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CA Final · Advanced Auditing, Assurance and Professional Ethics · General Auditing Principles and Auditors Responsibilities

CA Nisha is planning the audit of Deccan Steels Ltd. She wants to decide the nature, timing and extent of further audit procedures. According to SA 200, why are risks of material misstatement at the assertion level assessed?

Assertion-level risks of material misstatement are assessed to determine the nature, timing and extent of further audit procedures required to obtain sufficient appropriate audit evidence, so that the auditor can express an opinion at an acceptably low level of audit risk.

  1. ATo eliminate audit risk entirely so that the opinion becomes a guarantee
  2. BTo determine the nature, timing and extent of further audit procedures needed to obtain sufficient appropriate audit evidence, enabling an opinion at an acceptably low level of audit riskCorrect
  3. CTo shift responsibility for the financial statements from management to the auditor
  4. DTo replace the need for any audit evidence on balances

Explanation

SA 200 states that assessed assertion-level risks determine the nature, timing and extent of further procedures, which provide evidence to express an opinion at an acceptably low level of audit risk. Audit risk is reduced, not eliminated, and evidence is still required.

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