How to Understand Inherent Risk in Audit Risk Assessment

Описание: Inherent risk is a big deal in SAS 145, Understanding the Entity and Its Environment and Assessing the Risk of Material Misstatement.

In this video, I explain the impact of inherent risk on audit planning and risk assessment. Using inherent risk factors, auditors will determine what areas of the financial statements to audit. Inherent risk also affects where significant risks exist in the financial statements. SAS 145 is effective for years ending December 31, 2023.

I also explain what significant classes are as well as relevant assertions.

0:00 Introduction
0:45 Think about financial statements
1:40 Materiality example
2:58 Material amounts or disclosures
4:15 RMM more than remote
5:35 Inherent risk factors
8:00 Relevant assertions
9:45 Typical assertions
11:28 Interim summary
13:07 Significant classes
14:40 Significant risk
15:55 Upper end of the spectrum of inherent risk
17:48 Estimate example as a significant risk
18:37 Test of details
19:10 Summary of how inherent risk affects planning

For more information about SAS 145, see https://cpahalltalk.com/sas-145/

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