THE AUDITORS

RESPONSES TO
ASSESSED RISKS
ISA 330

Auditor s Responsibility
ISA 330 deals with the
responsibilities faced by the auditor
in designing & implementing audit
procedures which specifically
respond to the RMM.

The Two Fundamental Processes

Substantive
Procedures
An audit procedure designed to detect
material misstatements at the assertion
level.
It comprises:
1. Test of Details (of classes of transactions,
account balances & disclosures);
2. Substantive Analytical Procedures

Tests of Controls
An audit procedure designed to evaluate
the operating effectiveness of controls in
preventing, or detecting and correcting,
material misstatements at the assertion
level.

Responsive to the assessed

RMM
Relates to the auditors approach for
designing and performing further
audit procedures.

Responsive to the assessed

RMM
The auditor may consider that TOC
would not be appropriate and, thus,
gather sufficient appropriate audit
evidence from wholly substantive
Ineffect
approach.
ive

Substantive Approach
Where the auditor considers a wholly
substantive approach appropriate,
the auditor shall be satisfied that
performing
only
substantive
procedures would reduce the RMM to
an acceptably low level.
The audit procedures must be
responsive to the assessed level of
RMM at both the assertion level and
at the financial statement level.

At the Assertion
Level

The auditor should consider

both inherent risk and
control risk.

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Recurring Audits and TOC

In some jurisdictions, detailed
testing of internal controls is only
required in every third audit and
indeed ISA 330 recommends
detailed testing of IC every third
audit.
Others may recommend shorter or
longer intervening periods to
undertake more rigorous tests of IC.

The factors too consider TOC are generally:

The risk of material misstatement

The general operating effectiveness
of the IC
The extent of reliance on the IC
the effectiveness of general IT
related IC
The application of the IC by the
entity.

Evaluating the Operating Effectiveness of IC

The auditor needs to assess whether

misstatements that have been
detected by way of substantive
procedures are indicative that the IC
are not operating as effectively as
they should be.

Extent TOC

Depends on the size and

complexity of the audit
assigment.

Substantive Procedures
Are detailed procedures used by
auditors to collect audit evidence
that the assertions made by
management in the F/S (both figures
& disclosures) are reliable and are in
accordance with the applicable
financial reporting framework and
relevant legislation.

Timing of Tests
Interim Periods

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