AuditingandAssuranceStandardsCouncil

PhilippineStandardonAuditing315(Redrafted)

IDENTIFYINGANDASSESSINGTHERISKSOFMATERIAL
MISSTATEMENTTHROUGHUNDERSTANDINGTHEEN
TITYANDITSENVIRONMENT
PHILIPPINESTANDARDONAUDITING315(REDRAFTED)
IDENTIFYINGANDASSESSINGTHERISKSOFMATERIALMISSTATEMENTTHRO
UGHUNDERSTANDINGTHEENTITYANDITSENVIRONMENT

CONTENTS
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Introduction

Objective
Definitions
Requirements

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ApplicationandOtherExplanatoryMaterial

Acknowledgment

Introduction
ScopeofthisPSA
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EffectiveDate
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Objective
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Definitions
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Requirements
RiskAssessmentProceduresandRelatedActivities
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TheRequiredUnderstandingoftheEntityanditsEnvironment,Includingt
heEntitysInternalControl
TheEntityandItsEnvironment
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TheEntitysInternalControl
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IdentifyingandAssessingtheRisksofMaterialMisstatement
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RisksthatRequireSpecialAuditConsideration
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RisksforWhichSubstantiveProceduresAloneDoNotProvideSufficientAp
propriateAuditEvidence
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RevisionofRiskAssessment
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MaterialWeaknessinInternalControl
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Documentation
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ApplicationandOtherExplanatoryMaterial
RiskAssessmentProceduresandRelatedActivities

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InquiriesofManagementandOthersWithintheEntity
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AnalyticalProcedures

ObservationandInspection

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InformationObtainedinPriorPeriods

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DiscussionAmongtheEngagementTeam

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TheRequiredUnderstandingoftheEntityandItsEnvironment,Includingt
heEntitysInternalControl
TheEntityandItsEnvironment
Industry, RegulatoryandOtherExternalFactors

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NatureoftheEntity

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Businessoperations

Investmentsandinvestmentactivities

Financingandfinancingactivities

Financialreporting

TheEntitysSelectionandApplicationofAccountingPolicies

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ObjectivesandStrategiesandRelatedBusinessRisks

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MeasurementandReviewoftheEntitysFinancialPerformance

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TheEntitysInternalControl

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GeneralNatureandCharacteristicsofInternalControl
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ControlsRelevanttotheAudit

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NatureandExtentoftheUnderstandingofRelevantControls
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ComponentsofInternalControlControlEnvironment

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Communicationandenforcementofintegrityandethicalvalues
) Commitmenttocompetence
1 ) Participationbythosechargedwithgovernance
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) Managementsphilosophyandoperatingstyle

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Organizationalstructure
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Assignmentofauthorityandresponsibility
) Humanresourcepoliciesandpractices

ComponentsofInternalControlTheEntitysRiskAssessmentProcess

ComponentsofInternalControlTheInformationSystem, Includingt
heRelatedBusinessProcesses, RelevanttoFinancialReporting, and
Communication

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ComponentsofInternalControlControlActivities

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ComponentsofInternalControlMonitoringofControls

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IdentifyingandAssessingtheRisksofMaterialMisstatement
AssessmentofRisksofMaterialMisstatementattheFinancialStatementL
evel

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AssessmentofRisksofMaterialMisstatementattheAssertionLevel

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ProcessofIdentifyingRisksofMaterialMisstatement

RelatingControlstoAssertions

SignificantRisks

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RisksforWhichSubstantiveProceduresAloneDoNotProvideSufficientApp
ropriateAuditEvidence

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RevisionofRiskAssessment

MaterialWeaknessinInternalControl

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Documentation

Acknowledgment

Appendix
1

InternalControlComponents
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ControlEnvironment
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Communicationandenforcementofintegrityandethicalvalues
) Commitmenttocompetence
)
Participationbythosechargedwithgovernance
) Managementsphilosophyandoperatingstyle
1 ) Organizationalstructure
2
)
Assignmentofauthorityandresponsibility
) Humanresourcepoliciesandpractices

EntitysRiskAssessmentProcess
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Changesinoperatingenvironment
Newpersonnel
Neworrevampedinformationsystems
Rapidgrowth
Newtechnology

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Newbusinessmodelsproducts, oractivities
Corporaterestructurings
Expandedforeignoperations
Newaccountingpronouncements

InformationSystem,IncludingtheRelatedBusinessProcesses,Releva
ntToFinancialReporting,AndCommunication
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ControlActivities
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Performancereviews
Informationprocessing
1 Physicalcontrols
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Segregationofduties
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MonitoringofControls
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Appendix
2

ConditionsandEventsthatMayIndicateRisksofMateri
alMisstatement

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Chairman