Assessing Risk in the FSA
Identified risks are shown on the FSA that the risks are linked to. Risks will show at the relevant assertion line. When all assertions are shown in detail, the risk assessment values of identified risks populate the risk at the assertion level in the FSA.
The level set for the Risk of Material Misstatement in the FSA defines which procedures are shown in the linked worked programs.
Click the Risk Assessment tab at the top of the FSA document.
In the first row, select the applicable inherent and control for the Entity level and IT general weaknesses and controls. This updates the Assessed risks at financial statement level in the detailed audit response section of the work program documents.If the firm author has enabled Risk assessment at entity level in the AO | General options document, then you can automatically populate the RMM scoring based on a value or proposed value. Select between Proposed, High, Medium or Low from the auto-fill button.
Selecting proposed will base RMM scoring to the following:
- If the Inherent and Control risk columns are included, the proposed RMM value of the Entity level and IT general weaknesses and controls row is based on the Defined RMM Scoring dialog
If the Inherent and Controls columns are included, the proposed RMM value of the Entity level and IT general weaknesses and controls row is the highest RMM score assigned to a Entity level risk
If the current inherent risk matches the one that is set in the AO - General Options and is enabled, then a warning ( ) will display. You can clear the warning by clicking the icon and selecting Yes in the prompt.
- You have two options to complete the risk assessment:
selecting to expand the assertion rows for each FSA and manually fill the applicable risk levels for inherent, control or RMM.
If the firm author has enabled the Automate Assessment of Inherent/Control/RMM in the AO | General Options document, then you can automatically populate the risk assessment based on a value or a proposed value. At the top of the risk level columns are auto-fill buttons.
Select between Proposed, High, Medium or Low. Selecting *Proposed to populate the risk level are based on the following logic:
- Inherent Risk - is based on the accumulation of inherent risks collected in the risk dialog and populates the highest value detected per FSA and assertion.
- Control Risk - is based on the assessment from the conclusion area of the control matrix associated with the relevant business cycle.
For more information, see About the Control Matrix
- RMM - is based on the scoring defined by the firm authors in the AO | General Options document.
From the Areas menu, select Risk Ref. The Risk Ref column will display a risk counter which will show the number of risks linked for each FSA item and assertion. Significant risks will be identifiable with a star icon.
Note: A bubble tool-tip will display if there are any changes in the proposed risk level since the FSA was last opened.