 in this presentation we will take a look at a general type of response strategy when responding to the risk of material. First a word from our sponsor. Well actually these are just items that we picked from the youtube shopping affiliate program but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchase and use ourselves. Focusrite Scarlett Solo 3rd Gen USB interface with software suite. I've been using a focusrite for years for my audio needs before which time I had a USB microphone which plugged directly into the computer but I think you'll find as I have found if you want to increase the quality of your microphone you will need an interface and the focusrite is the go-to interface as far as I'm concerned I've been using this for years now it works well it's easy to use it seems quite durably built because I only do the screen recordings I only need the one solo interface however if you have multiple microphones you need to plug in or if you have other instruments you need to plug in you can look at a similar model that has more input ports. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com where we have many different courses you can purchase one at a time or have a subscription model giving you access to all the courses courses which are well organized have other resources like excel files and pdf files to download and no commercials real misstatement remember our goal here as the auditor is to take a look at those financial statements give an opinion on the financial statement to see whether they are in accordance with some type of standard typically being generally accepted accounting standards therefore we are looking for those items that are going to be material misstatements material deviations from generally accepted accounting standards we want to think about the thought process of responding to the risk of those material misstatements here's a flow chart that we'll go through that we can actually visualize basically the thought process as we think through a material misstatement so we're going to assess the risk of material misstatement at the financial statement and assertion level so we have a risk of a material misstatement we're going to check them that at the financial statement level as well as the assertion level we're going to start with the financial statement level because if there's risk if we look at this risk and we say that this is something that can have an effect on the financial statements as a whole our end goal if it's a if we're saying that there's going to be a material misstatement or there's a substantial risk of material misstatement at the financial statement level then we could take a look at it at that level because that is our objective to make to give it an opinion on whether or not the financial statements are free of material misstatements so do these risks relate perversely to the financial statements if yes we're going to develop an overall response at the financial statement level now if the answer is no then we want to consider this at the assertion risk level and you can think of this at the more granular level so we could say well if it's not at the financial statement level that this risk we think that's going to have a material impact on the financial statement level we still want to consider whether it has an impact on the assertion level the assertions individual assertions by management recall that we went through basically the types of assertions that management has we want to test those specific assertions and even though some type of misstatement may not be something that we're going to say hey this has a material impact directly on the financial statement level we we still want to consider whether it has an impact on the assertion level because we're going to set a misstatement threshold or tolerable misstatement threshold per assertion and so we still want to consider basically any kind of risk or material risk at that assertion level as well determine what might go wrong at the assertion level and then to design audit procedures for the assertion level of risk at that point auditors response to the risk assessment auditor may do the following to respond to financial statement level risk so the financial statement level risks this could be the response of the auditor assigned personnel with more experience or specialized knowledge so if we see a risk financial statement level risk what can we do about it part of the plan we might want to put in place as we go through the auditing process is to say hey we're going to put more experienced personnel or more specialized personnel we're going to put people that have more experience in the auditing process process in general or possibly people that have more experience with a particular set of problems in a particular type of audit we're doing possibly problems related to a specific industry or problems related to a specific type of activity that we are that was is within that particular audit i'll review selection and application of accounting policies to identify bias that may create a material misstatement and add add elements of unpredictability in the selection of audit procedures