What is Significant classes of transactions, balances and disclosures?
In short
A class of transactions, account balance or disclosure is significant if it has one or more relevant assertions, meaning there is a reasonable possibility of a material misstatement in it.
Key takeaways
- Identifying them focuses the risk assessment and audit response.
- Substantive procedures are still required for every material class, balance and disclosure, whatever the assessed risk.
- The auditor reconsiders the identification as the audit progresses.
Where it's tested
AUD: Assessing Risk of Material Misstatement — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under SAS No. 145, how must the auditor assess the risk of material misstatement at the relevant assertion level?