Final answer:
AS 12 outlines audit procedures for risk assessment which include understanding the entity, considering potential fraud, and evaluating information to identify risks of material misstatement.
Step-by-step explanation:
AS 12, known as Auditing Standard No. 12, provides guidance on the audit procedures an auditor should consider when performing the risk assessment. These procedures are aimed at identifying and assessing risks of material misstatement in a company's financial statements.
The standard outlines that auditors should gather information necessary to identify risks by understanding the entity and its environment, including its internal control.
Auditors should also consider how fraudulent financial reporting or misappropriation of assets might occur, and design further audit procedures that address the assessed risks of material misstatement at the assertion level. Additionally, AS 12 instructs auditors to evaluate the information gathered to identify the risks of material misstatement and to update their risk assessments as they conduct the audit.