Acca aa s21 Notes

The control environment.
This refers to the context in which the internal controls relevant to 
the preparation of the financial statements operate. The effectiveness of the control 
environment has a significant bearing on audit procedures, as we will see in Chapter 12.
3.2 Risk assessment procedures
Risk assessment procedures (i.e. audit procedures designed and performed to identify and assess risks 
of 
material misstatement 
– ‘RoMM’) must include:
๏
Enquiries
of management and others (e.g. internal audit) who may have information that is 
likely to assist in identifying RoMM.
๏
Analytical procedures
which may help identify unusual transactions/events and ratios or 
trends that have audit implications.
๏
Observation
(e.g. of processes) and 
inspection
(e.g. of assets and documents) to support the 
enquiries and provide information.
September 2021 to June 2022 exams
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Prior year information obtained can be used as long as it remains relevant and reliable as audit 
evidence for the current audit. Information obtained during client acceptance procedures may also 
be relevant.
RoMM exists when there is a 
reasonable possibility
of: 
(1)
A misstatement occurring (i.e. 
likelihood
); and 
(2)
It being material if it were to occur (i.e. 
magnitude
).
Risks must be assessed at two levels to provide a basis for designing 
further audit procedures
:
(1)
The