ASSIGNMENT 3 Assertions Learning objective In this assignment, you will extend your knowledge gained in assignment 1 by taking the significant risks you have already identified and then conducting further analysis on their likelihood and materiality. Risks identified from gaining an understanding of the client's business are referred to as inherent risks. These risks are considered in the audit-risk formula. The auditor needs to identify which financial statement assertions may be affected by these inherent risks. Identifying these risks will help determine the nature of the audit procedures to be performed. Management implicitly or explicitly makes assertions regarding the recognition, measurement, and presentation of the various elements of the financial statements and related disclosures. Auditors use assertions for account balances to form a basis for the assessment of risks of material misstatement. That is, assertions are used to identify the types of errors that could occur in transactions that result in the account balances. Consequently, breaking down the financial statement accounts into these assertions will direct the audit effort to those areas of higher risk. Assertions direct the audit, and audit procedures are designed so that they are responsive to the assessed risks. Broadly, these assertions can be classified in the following categories: existence or occurrence completeness valuation and allocation, or accuracy rights and obligations Note: For class, we combined classification with presentation, disclosure, and understandability cut-off into one P&D assertion. You are welcome to leave them separate (classification versus P&D) or classification maintain them as a combined assertion (P&D) as we did in class. presentation, disclosure, and understandability Required Using the risks identified in assignment 1 on working paper Al-1, complete the following information in the relevant columns of the working paper. Identify the associated financial account (if you haven't done so already) and assertions that would be affected. Give an assessment of "high," "medium," or "low" in relation to the likelihood and materiality of the risk occurring. Briefly (one bullet point) justify each assessed risk level. A risk should be classified as "high" if it is highly likely to be present and material. A risk should be classified as "medium" if it may be present and material. Risks should be classified as "low" if they are unlikely to be present and/or not material. Additional Question: given your analysis-for this client- is the overall level of inherent risk "low," "medium," or "high"