Bangladesh
Standard on Audit(BSA-315)
What is the Bangladesh standard on Audit(BSA-315) ? Describes in details:
BSA-315: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment is a standard issued by the Institute of Chartered Accountants of Bangladesh (ICAB). It provides guidance on how auditors should identify and assess the risks of material misstatement in the financial statements during an audit.
In short, BSA-315 addresses the following key points:
1.Objective:
The primary objective of BSA-315 is to ensure that auditors obtain a thorough understanding of the entity being audited, its environment, and its internal controls in order to identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error.
2.Understanding the Entity and Its Environment:
The auditor must gather sufficient knowledge about the entity’s business operations, its industry, regulatory environment, and other external factors that could influence the financial statements. This includes understanding the entity’s financial reporting framework, business risks, and key stakeholders.
3.Internal Control Systems:
The auditor must evaluate the design and implementation of the entity's internal controls. This helps in identifying areas where the internal controls might be weak or ineffective, thus increasing the risk of material misstatement.
4.Risk Assessment:
The auditor is required to assess the risk of material misstatement in the financial statements, considering factors such as the complexity of transactions, changes in the entity's environment, and the possibility of fraud. The auditor should consider both inherent risks (due to the nature of the business) and control risks (due to weaknesses in internal controls).
5.Use of Professional Judgment:
The auditor must apply professional judgment when assessing risks, taking into account the significance and likelihood of potential misstatements.
6.Documenting the Assessment:
The auditor must document the risks identified and the audit procedures designed to address them. This documentation supports the auditor’s risk assessment and helps in determining the nature, timing, and extent of audit procedures.
7.Communication with Management:
The auditor should discuss the identified risks and any concerns with the entity’s management and those charged with governance to ensure that they are aware of the potential risks and their impact on the audit.
In summary, BSA-315 emphasizes the importance of understanding the entity’s operations, environment, and internal controls in order to assess the risks of material misstatement. The standard guides auditors in identifying these risks and tailoring the audit procedures to address the specific risks identified, ensuring a thorough and effective audit.