Risk based auditing is an innovative approach focus on the key risks the firms are facing in specified industry on the way to achieve its target. For instance, Revenue Recognition while be the key risk for the Airline companies, Provision for Doubtful debts might be a significant risk for a trading company. It aims to minimize to an acceptable level, which is manageable
In this thread, we intend to at the assessment of internal control over financial reporting. It generally involved a step-by-step assessment:
1. Plan and scope the evaluation: establish assessment process. Identify significant financial reports. Define materiality. Identify significant accounts, relevant financial report assertions, and major transaction cycles. Link the accounts and cycles. Determine organizational approach.
2. Document Control: document and obtain understanding of controls for all significant accounts, groups of accounts, and transactions .
3. Evaluate design and operating effectiveness: evaluate design and operating effectiveness of internal control over financial reporting and documents results of the evaluation.
4. Identify and Correct Deficiencies: identify, accumulate , and evaluate design and operating control deficiencies ; communicate findings and correct deficiencies
5. Report on Internal Control: prepare management's written assurance on the effectiveness of internal control over financial reporting.