Question

What RESPONSES does AS 13 discuss in addressing assessed RMM?

a) Ignore the risk, as it is immaterial.

b) Adjust the financial statements to reflect the assessed risk.

c) Disclose the risk in the footnotes but take no further action.

d) Perform additional audit procedures to obtain sufficient appropriate audit evidence.

Answer 1

AS 13 discusses responses to address assessed RMM, including performing additional audit procedures, adjusting financial statements, disclosing the risk in footnotes, or ignoring it if immaterial.

Step-by-step explanation:

The AS 13 (Accounting Standard 13) addresses the ways to respond to an assessed Risk of Material Misstatement (RMM) in an audit. The responses discussed are:

1. Perform additional audit procedures to obtain sufficient appropriate audit evidence. This means that the auditor conducts further testing to gather more evidence and reduce the risk of misstatement.
2. Adjust the financial statements to reflect the assessed risk. This response involves making adjustments to the financial statements to accurately represent the assessed risk.
3. Disclose the risk in the footnotes but take no further action. In this response, the risk is disclosed in the footnotes of the financial statements, but no additional actions are taken to address it.
4. Ignore the risk, as it is immaterial. If the risk is considered immaterial, the auditor may choose to ignore it without taking any action.