US CMA Part 1 · Chapter 5 · Question 9 of 23
When auditing internal control over financial reporting, the PCAOB requires a top-down, risk-based approach. Where does this approach begin?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) At the financial statement level, with an understanding of overall risks and entity-level controls
Explanation
The top-down approach starts at the financial statement level, considers entity-level controls, then moves to significant accounts, disclosures and relevant assertions, and finally selects the controls that address the risk of material misstatement. This focuses effort where risk is greatest.
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