In short
A significant risk is an identified risk of material misstatement close to the upper end of the spectrum of inherent risk, or one the auditing standards require to be treated as significant, such as fraud risks.
Key takeaways
- The auditor must obtain an understanding of controls that address it.
- Substantive procedures for a significant risk must include tests of details unless the auditor also tests controls; analytical procedures alone aren't enough.
- Fraud risks, including the presumed risk in revenue recognition, are always significant risks.
Where it's tested
AUD: Assessing Risk of Material Misstatement — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A significant risk requiring special audit consideration would most likely arise from: