The Importance of a Comprehensive Risk Assessment by Auditors and Management
Aug 25, 2023
On August 25, 2023, the Securities and Exchange Commission (SEC) posted a statement highlighting the importance of a comprehensive risk assessment by auditors and management. Management’s and auditors’ risk assessment processes are critical to the decisions regarding financial reporting and the effectiveness of internal control over financial reporting.
This statement discusses management’s obligation to:
- take a holistic approach when assessing information about the business and avoid the potential bias toward evaluating problems as isolated incidents, in order to timely identify risks, including entity-level risks;
- design processes and controls that are responsive to identified risks;
- effectively identify information that issuers are required to communicate to investors.
Additionally, it discusses auditors’ responsibilities as gatekeepers to hold management accountable in the public interest.
Review the statement on SEC’s website.
