Acca aa s21 Notes

Inherent risk factors
– characteristics of events or conditions that affect the susceptibility of an 
assertion to misstatement, before consideration of controls.
๏
Spectrum of inherent risk
– the degree to which inherent risk varies.
๏
Relevant assertion
– an assertion with an identified risk of material misstatement.
๏
Significant class of transactions, account balance or disclosure – one for which there is one or 
more relevant assertion.
*
๏
Significant risk
– a risk of misstatement which is close to the upper end of the spectrum of 
inherent risk or treated as significant in accordance with an ISA (e.g. revenue recognition).
Understand the entity
Identify relevant assertions
Identify significant transactions, 
balances and disclosure
Determine where on the 
spectrum of risk
Significant risks identified
* IMPORTANT 
note: Substantive procedures 
must
be designed and performed for each 
material
class of transactions, account balance and disclosure (regardless of assessed RoMM).
Assertions are described in more detail in Chapter 9.
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AUDIT EVIDENCE (I)
Chapter 10
AUDIT EVIDENCE
1. Gathering audit evidence
The procedures for obtaining audit evidence are:
๏
A
nalytical procedures (to be explained shortly)
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E
nquiry and confirmation. For example, asking client staff what checks they do when goods are 
received, or asking third parties (such as a bank) to confirm a balance.
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