Assertion

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yesha

yesha (Querist)
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24 December 2013 what is an assertion level of risk in risk of material misstatment ??? kindly explain with examples

Sanket

Sanket (Expert)
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24 December 2013 Assertion level risks are
risks that are limited to one or more specific
assertions in an account or in several
accounts, for example , the valuation of
inventory or the occurrence of sales. Assertion
level risks are addressed by the nature , timing,
and extent of further audit procedures , which
may include substantive procedures or a
combination of tests of controls and
substantive procedures . The risk of material
misstatement at the assertion level has two
components : Inherent Risk ( IR) , which is
the susceptibility of an assertion to a material
misstatement , assuming that there are no
related controls. Inherent risk is greater for
some assertions and related account balances ,
classes of transactions , and disclosures than
for others. Control Risk ( CR ) , which is the
risk that a material misstatement that could
occur in an assertion will not be prevented or
detected by the entity's internal control on
a timely basis . Control risk is a function of the
effectiveness of the design and operation of the
entity's internal control .