As part of the risk assessment procedure, an auditor is required to determine whether any of the identified risks are, in their professional…

As per SA 315, “Identifying and Assessing Risks of Material Misstatement Through Understanding the Entity and Its Environment”, As part of the risk assessment, the auditor shall determine whether any of the risks identified are, in the auditor's judgment, a significant risk. In exercising judgment as to which risks are significant risks, the auditor shall consider the following factors at least that: (i) Whether the risk is a risk of fraud; (ii) Whether the risk is related to recent significant economic, accounting, or other developments like changes in regulatory environment, etc., and, therefore, requires specific attention; (iii) The complexity of transactions; (iv) Whether the risk involves significant transactions with related parties; (v) The degree of subjectivity in the measurement of financial information related to the risk, especially those measurements involving a wide range of measurement uncertainty; and (vi) Whether the risk involves significant transactions that are outside the normal course of business for the entity, or that otherwise appear to be unusual.