Using the International Standard of Auditing 315 “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment” in the Auditing Practice

Keywords: audit, business entity, financial reporting, internal control, control environment, control measures, risk assessment.

Abstract

The article contains results of a study focused on practical issues of the application of the International Standard of Auditing (ISA) 315 “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment”. It is argued that by using provisions of ISA 315 at the phase of planning of an auditing engagement, managers of an auditing entity have to assess sectoral, regulatory and other external factors with impact on the financial reporting process, including the involved conceptual framework. The characteristics of an auditing entity to be analyzed by the auditor are determined: nature of business, pattern of ownership and corporate management, types of investment, structure and methods of financing. The auditor’s analysis of these issues has to result in his/her conclusion about the inherent risk, which is the risk of client’s business. When planning audit for small firms, an auditor can make use of the so called economies of scales. It means that small firms can minimize the measures of control through introducing components of the control environment in a way different from other business entities classified as large by activity scopes. Auditing procedures pertaining to components of the control environment should be initiated through inquiries, observations, reviews of documents and/or risk assessment procedures. A systematization of business risks and measures of control over audit customers, conditions and events that may signal the existence of risks of significant material misstatement in financial statements is made.

Downloads

Download data is not yet available.

References

Bondar V. P., & Bondar Yu. V. (2015). Yakist v audyti ta deiaki aspekty upravlinnia yakistiu [Quality in audit and some aspects of quality management]. Problemy teorii ta metodolohii bukhhalterskoho obliku, kontroliu i analizu – Problems of Theory and Methodology of Accounting, Control and Analysis, 1(31), 36–64 [in Ukrainian].

Vasyliuk M. M. (2019). Kontseptualni osnovy yakosti audytu [The conceptual framework for quality of audit]. Ivano-Frankivsk: Publishing house of Vasyl Stefanyk Precarpathian National University [in Ukrainian].

Vasyliuk M. M. (2019) Protsedurne zabezpechennia zovnishnoho kontroliu yakosti audytu finansovoi zvitnosti [Audit of financial statements: the procedural support for the external quality control]. Collection of abstracts from: Vseukrainska naukovo-praktychna konferentsia “Suchasni mizhnarodni ekonomichni vidnosyny: stanovlennia ta osoblyvosti rozvytku” – All-Ukrainian Scientific and Practical Conference “International economic relations in the modern time: formation and features of development”. (pp. 94–97). Odesa [in Ukrainian].

Kamenska T. O. (2015). Ryzyky v audyti ta yikh otsinka [The risks in audit and their assessment]. Statystyka Ukrainy – Statistics of Ukraine, 2, 43–45 [in Ukrainian].

Riadska V. V. (2014). Analiz zmistu robochoi nezalezhnosti v audyti [Analysis of content of working independence in audit]. Visnyk Chernihivskoho derzhavnoho tekhnolohichnoho universytetu. Seriia: Ekonomichni nauky – Bulletin of Chernihiv State Technological University. Series: Economics, 1, 253–259 [in Ukrainian].

Audytorska palata Ukrainy. Kruhlyi stil “Ryzyky v audyti” (22.04.2021) [Audit Chamber of Ukraine. Round table “Risks in audit” (22.04.2021)]. Retrieved from: https://www.apu.com.ua/2021/04/23/%D0%B2%D1%96%D0%B4%D0%B1%D1%83%D0%B2%D1%81%D1%8F-%D0%BA%D1%80%D1%83%D0%B3%D0%BB%D0%B8%D0%B9-%D1%81%D1%82%D1%96%D0%BB-%D1%80%D0%B8%D0%B7%D0%B8%D0%BA%D0%B8-%D0%B2-%D0%B0%D1%83%D0%B4%D0%B8%D1%82/ [in Ukrainian].

Mizhnarodnyi standart audytu 315 “Identyfikatsiia ta otsiniuvannia ryzykiv suttievoho vykryvlennia cherez rozuminnia subiekta hospodariuvannia i yoho seredovyshcha”. Mizhnarodni standarty kontroliu yakosti, audytu, ohliadu, inshoho nadannia vpevnenosti ta suputnikh posluh (vydannia 2016–2017 roku). Arkhivna versiia saitu Audytorskoi palaty Ukrainy [International Standard of Auditing 315 “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment”. International Standards of Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements (edition 2016–2017). The archive version of the Audit Chamber of Ukraine. Retrieved from https://www.apu.net.ua/component/content/article/2-uncategorised/1151-miznarodni-standarti-kontrolu-yakosti-2016-2017 [in Ukrainian].

Pro bukhhalterskyi oblik ta finansovu zvitnist v Ukraini: Zakon Ukrainy vid 16.07.1999 r. No 996-XIV [Accounting and Financial Statements in Ukraine: Law of Ukraine from 16.07.1999 No 996-XIV]. Database “Legislation of Ukraine”. Verkhovna Rada of Ukraine. Retrieved from https://zakon.rada.gov.ua/laws/show/996-14#Text [in Ukrainian].


Abstract views: 278
PDF Downloads: 282
Published
2021-12-21
How to Cite
LUBENCHENKO, O., & KORINKO, M. (2021). Using the International Standard of Auditing 315 “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment” in the Auditing Practice. Scientific Bulletin of the National Academy of Statistics, Accounting and Audit, (3-4), 51-63. https://doi.org/10.31767/nasoa.3-4-2021.06