Acca aa s21 Notes

The risk assessment process
relevant to the preparation of the financial statements concerns 
how management identifies, assesses and addresses risks. It has to determine the significance of 
those risks and the likelihood that are occurring. Having identified a risk, having assessed the 
likelihood of its occurring, management has to decide what to do about it. What controls would 
address the risks identified?
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The information system
and communication. Information processing activities include:
‣
How transactions are initiated, recorded, processed, corrected as necessary, incorporated in 
the general ledger and reported in the financial statements 
‣
How information about events and conditions, other than transactions, is captured, 
processed and disclosed in the financial statements 
‣
The accounting records, financial reporting process and relevant resources, including the IT 
environment. 
September 2021 to June 2022 exams
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Communication channels may be structured in larger entities (e.g. policy and financial 
reporting manuals).
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Control activities 
are defined as "those policies and procedures, that help ensure that 
management directives are carried out" (see later).
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Monitoring process.
How the entity monitors the effectiveness of controls and identifies and 
remedies control deficiencies may include the internal audit function, if any (see Chapter 23). In 
less complex entities, management's involvement in operations and/or periodic review of 
accounting information may be the only monitoring activities to help prevent or detect 
misstatements.