1. Changes in operating environment

      2. New personnel

      3. New or revamped information systems

      4. Rapid growth

      5. New technology

      6. New business models, products, or activities

      7. Corporate restructurings

      8. Expanded foreign operations

      9. New accounting pronouncements

      10. Changes in economic conditions

      (AU-C 315.A90)

      NOTE: The auditor's assessment of inherent and control risks is a separate consideration and not part of the entity's risk assessment.

      1. The classes of transactions that are significant to the financial statements

      2. The procedures, both automated and manual, by which those transactions are initiated, recorded, processed, and reported from their occurrence to inclusion in the financial statements

      3. The related accounting records, whether electronic or manual, supporting information, and specific accounts involved in initiating, recording, processing, and reporting transactions

      4. How the information system captures other events and conditions that are significant to the financial statements

      5. The financial reporting process

      6. Controls surrounding journal entries, including nonstandard journal entries used to record nonrecurring, unusual transactions, or adjustments

      (AU-C 315.19)

      1. The procedures used to enter transaction totals into the general ledger

      NOTE: The auditor should be aware that when information technology (IT) is used to automatically transfer information from transaction processing systems to general ledger or financial reporting systems, there may be little or no visible evidence of intervention in the information systems (e.g., an individual may inappropriately override automated processes by changing the amounts being automatically passed to the general ledger or financial reporting system).

      2. The procedures used to initiate, record, and process standard (e.g., monthly sales and purchase transactions) and nonstandard (e.g., business combinations or disposals, or a nonrecurring accounting estimate) journal entries in the general ledger

      NOTE: Auditors should be aware that:

      ● When IT is used to maintain the general ledger and prepare financial statements, such nonstandard entries may exist only in electronic form and may be more difficult to identify through physical inspection of printed documents.

      ● Financial statement misstatements are often perpetrated by using nonstandard entries to record fictitious transactions or other events and circumstances, particularly near the end of the reporting period.

      3. Other procedures used to record recurring and nonrecurring adjustments (e.g., consolidating adjustments and reclassifications that are not made by formal journal entries)

      1. Authorization

      2. Performance reviews

      3. Information processing

      4. Physical controls

      5. Segregation of duties (e.g., assigning different people the responsibility for authorizing transactions, recording transactions, and maintaining custody of assets)

      (AU-C 315.A99)

      NOTE: Section 315 requires the auditor to gain an understanding of some controls that previously did not have to be addressed, including the following:

      ● How the incorrect processing of significant transactions is resolved

      ● The process of reconciling detail to the general ledger for significant accounts

      ● Control activities related to “significant risks,” as defined in the standard

      1. Identify risks throughout the process of obtaining an understanding of the entity, its internal control, and its environment.

      2. Relate the identified risks to what can go wrong at the relevant assertion level.

      3. Consider whether the risks could result in a material misstatement to the financial statements.

      4. Consider the likelihood that the risks could result in a material misstatement of the financial statements.

      (AU-C 315.27)

      1. Financial-statement-level risks. Some risks of material misstatement relate pervasively to the financial statements taken as a whole and potentially affect many relevant assertions. These risks at the financial statement level may be identifiable with specific assertions at the class of transaction, account balance, or disclosure level. (AU-C 315.122)

      2. Assertion-level risks. Other risks of material misstatement relate to specific classes of transactions, account balances, and disclosures at the assertion level. The auditor's assessment of risks at the assertion level provides a basis for considering the appropriate audit approach for designing and performing further audit procedures. (AU-C 315.A126)