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Performing Audit Procedures in Response to Assessed Risks

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AU Section 318

Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained

(Supersedes SAS No. 55.) Source: SAS No. 110. Effective for audits of financial statements for periods beginning on or after December 15, 2006. Earlier application is permitted.

Introduction

.01 This section establishes standards and provides guidance on determining overall responses and designing and performing further audit procedures to respond to the assessed risks of material misstatement1 at the financial statement and relevant assertion levels in a financial statement audit, and on evaluating the sufficiency and appropriateness of the audit evidence obtained. In particular, this section provides guidance about implementing the third standard of field work, as follows:

The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.

.02 The following is an overview of this standard:

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Overall responses. This section provides guidance to the auditor in determining overall responses to address risks of material misstatement at the financial statement level and provides guidance on the nature of those responses. Audit procedures responsive to risks of material misstatement at the relevant assertion level. This section provides guidance to the auditor in designing and performing further audit procedures, including tests of the operating effectiveness of controls, where relevant or necessary, and substantive procedures, whose nature, timing, and extent are responsive to the assessed risks of material misstatement at the relevant assertion level. In addition, this section includes matters the auditor should consider in determining the nature, timing, and extent of such further audit procedures. Evaluating the sufficiency and appropriateness of the audit...