Risk Assessment Standards When Auditing Privately-Owned Companies

Overview

Auditors identify and assess the risks of a material misstatement by understanding the entity and its environment. Privately-owned companies present unique challenges. We’ll examine issues such as: Do identifiable controls exist? Do owners/managers promote compliance with company policies? Do owners/managers document controls and communicate them to staff? Are these controls observable? Can they be tested for operating effectiveness? Do owners/managers monitor employee performance and evaluate the controls in place?

Highlights

• Review of applicable auditing standards for risk assessment • Identification and discussion of high-risk audit areas • Discussion and analysis of control risk vs. inherent risk • Practical approach to auditing companies where controls are minimal or not adequately documented • Detailed discussion and examples of risk assessment procedures and alternative approaches

Objectives

• Recognize high-risk areas applicable to private companies • Determine the best approach to deal with private company shortcomings in control activities • Identify the appropriate risk assessment procedures in the circumstances