Risk Assessment - 2730

    1. How do we evaluate balance sheet accounts for purpose of scoping…i.e…should one take account balances as of year end or turnover within the account for deciding whether a particular account is in scope for testing…%0A2. What is logic behind using 5% of NPBT as materiality amount…does any accounting literature has mentioned this or generally used by stat auditors.%0A3. Can any one of you share version 3 of ‘A Framework for Evaluating%0AProcess/Transaction-Level Exceptions and Deficiencies’.%0AThanks in advance for your advise.

  • Balance sheet accounts should be evaluated on both turnover and account balances. For example, you would not want to eliminate from scope a clearing account that should be zero every month as it still could have items that are cleared incorrectly.%0AThe 5% is a number that used to be referenced in older accounting literature as a rule of thumb. It is still not a bad rule to go by.

  • Thanks for the clarification…

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