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CMA Intermediate · Corporate Accounting and Auditing · Audit Risk, Internal Control, Internal Check and Internal Audit

Under SA 315, whether an entity's risk assessment process is appropriate to the circumstances, including the nature, size and complexity of the entity, is best described as:

Whether an entity's risk assessment process suits its circumstances, including nature, size and complexity, is a matter of judgment. The auditor evaluates it professionally rather than applying a turnover threshold or presuming it is adequate, and it helps in identifying risks of material misstatement.

  1. AA matter of judgmentCorrect
  2. BA matter fixed by the entity's turnover
  3. CA matter decided by the audit committee alone
  4. DA matter that is always presumed to be satisfied

Explanation

The standard states that whether the entity's risk assessment process is appropriate to the circumstances is a matter of judgment. It is not fixed by a numeric threshold such as turnover, nor presumed to be satisfactory. The auditor forms that judgment while understanding the entity.

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