 in this presentation we will discuss the risk assessment process so what is the risk 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 Bayer dynamic not sure if I said that right but this is the DT 770 pro 250 ohm studio reference closed back headphones I wear headphones basically every day for a large part of the day they are important to me therefore I've gone through many different kinds of headphones I've had these for some time and they've worked quite well they fit over my ears but I'm still able to put my glasses on under the headphones the headphones not pinching too tight on the glasses to give me a headache which is nice the quality of the patting is good and it has lasted for some time I've had these for some time now and they haven't gotten all torn up on me or anything like that I also like that I have a cord when I'm doing my recordings as opposed to a usb centered headphone because that frees up a usb port and I find the usb headphones to be less reliable they come with an audio jack that looks like this which is useful for me because that plugs into my audio interface however if you want to use the headphones for some other purpose I believe it's fairly easy to get a converter to other types of audio jacks 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 risk assessment process why is the risk assessment process used risk assessment procedures are performed to attain an understanding of the entity and its environment so we're going to use this process to understand the entity and the environment which it is in auditors use this understanding to help identify business risk so of course once we have this understanding we're going to assess the business risk and understand potential misstatements that can result thinking about the response of the entity to business risk helps the auditor to assess the risk of material misstatement at the financial statement level so we got the business risk and we want to think about how the entity responds to that business risk that of course is going to help us to assess the material misstatement at the financial statement and assertion levels so risk assessment process perform risk assessment procedures to obtain understanding of the entity and environment so we're going to have procedures to do this including inquiries of management and others we have the analytical procedures including audit data and analytics and observations so obviously to understand this we're going to have inquiries we're going to ask management key components of the organization we're then going to do analytical procedures as we think of analytical procedures you always want to keep them in mind that they're going to be in different areas within the audit process so we're going to have substantive testing which may include analytical procedures but we're also possibly having them in the planning stage as well the analytical procedures those things that I would think of as things that are basically done within the accounting office we could do them without going out to the client we could do a comparison of this year to last year we can use uh see percentage changes dollar changes uh comparison to other types of industries we are then considering the nature of the entity industry regulations and external factors objectives strategies and business risk entity performance measure measures and internal controls identified business risk that can result in material misstatement in the financial statements is an objective evaluate the entity's risk assessment process to those business risks and obtain evidence of its implementation assess the risk of material misstatement at the financial statement and assertion levels so if we summarize the process then once again we're involves the inquiries of management and other entity personnel and others outside of the entity so we have the inquiry process we also have the analytical procedures recalling those analytical procedures can be used within the planning process and they're also often used in the substantive types testing those types of things typically done that we could think of them as being done within the office doing some type of comparison this year's last last year the dollar comparison ratio analysis comparison comparing to industries and then we have observation and inspection