Which statement best describes CAS 315 style risk assessment procedures?

Which statement best describes CAS 315 style risk assessment procedures?

• A. Procedures to understand the entity and its environment and identify risks
• B. Techniques to test IT system backups
• C. Procedures for financial statement presentation
• D. Methods for cash flow forecasting

Answer: (B)

CAS 315 focuses on getting information to identify and assess where misstatements could occur by understanding the entity and its environment, including internal controls. The best description is procedures to understand the entity and its environment and identify risks, because risk assessment is about gathering evidence to pinpoint areas with a risk of material misstatement so the audit can plan appropriately. Testing IT backups is a control-testing activity, not a risk assessment step. Procedures for financial statement presentation describe how things are reported, not how risks are identified. Cash flow forecasting deals with estimating future cash flows, not identifying misstatement risks.

CAS 315 focuses on getting information to identify and assess where misstatements could occur by understanding the entity and its environment, including internal controls. The best description is procedures to understand the entity and its environment and identify risks, because risk assessment is about gathering evidence to pinpoint areas with a risk of material misstatement so the audit can plan appropriately.

Testing IT backups is a control-testing activity, not a risk assessment step. Procedures for financial statement presentation describe how things are reported, not how risks are identified. Cash flow forecasting deals with estimating future cash flows, not identifying misstatement risks.