CA Ram Manohar and his team have just started the statutory audit of a listed company which is into manufacture of agro pesticides. The auditors…

Auditors CA Ram Manohar and his team can satisfy the objective of identifying and assessing the risk of material misstatement to an acceptably low level while planning and performing the audit of Listed company in accordance with SA 315. As per SA 315 “Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment", the objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels, through understanding the entity and its environment, including the entity's internal control, thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement. This will help the auditor to reduce the risk of material misstatement to an acceptably low level. The objective of the auditor as stated in SA 315 is to identify and assess the risks of material misstatement. (i) The auditor shall identify and assess the risks of material misstatement at: (I) the financial statement level (II) the assertion level for classes of transactions, account balances, and disclosures to provide a basis for designing and performing further audit procedures. (ii) For the purpose of identifying and assessing the risks of material misstatement, the auditor shall: - (I) Identify risks throughout the process of obtaining an understanding of the entity and its environment, including relevant controls that relate to the risks, and by considering the classes of transactions, account balances, and disclosures in the financial statements. (II) Assess the identified risks, and evaluate whether they relate more pervasively to the financial statements as a whole and potentially affect many assertions. (III) Relate the identified risks to what can go wrong at the assertion level, taking account of relevant controls that the auditor intends to test and (IV) Consider the likelihood of misstatement, including the possibility of multiple misstatements, and whether the potential misstatement is of a magnitude that could result in a material misstatement.