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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Planning, materiality and assessing the risk of material misstatement

When assessing the risk of material misstatement at the assertion level under ISA 315 (Revised 2019), which two components does the auditor assess to arrive at the risk?

The risk of material misstatement is made up of inherent risk and control risk. The auditor assesses both at the assertion level, then sets the acceptable detection risk in response. Detection risk is the auditor's own risk and is not a component of the RMM.

  1. AInherent risk and control riskCorrect
  2. BDetection risk and sampling risk
  3. CInherent risk and detection risk
  4. DControl risk and audit risk

Explanation

ISA 315 (Revised 2019) requires the auditor to assess inherent risk and control risk separately at the assertion level; together they form the risk of material misstatement. Detection risk is the auditor's own response risk and is set by reference to the RMM, so it is not part of the RMM.

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