A-7 Risk assessment matrix

Example risk / response documentation structure from the GAASFlow methodology library. Risks and responses are fictional for evaluation — tailor every engagement with professional judgment.

Engagement-level decisions (excerpt)

Topic	Response	W/P
Additional significant risks beyond presumed fraud risks?	No (documented)	A-7
Fraud discussion completed?	Yes	A-8
Going-concern indicators?	No	GC-1
Related-party activity relevant?	Yes — RP programs	RP-1

Risk / response matrix (excerpt)

Area / assertion	Risk	RMM	Planned response	W/P
Management override — All assertions affected	Presumed significant fraud risk of management overriding controls	Significant	Journal-entry testing; accounting-estimate bias review; unusual-transaction evaluation	F-1 / A-7
Revenue — Occurrence	Revenue recognized before criteria met	Mod	Cutoff testing; detail tests of sales; analytics	AR-1
Receivables — Valuation	Allowance understated	Mod	Aging analysis; subsequent collections; estimates inventory	AR-1 / A-26
Inventory — Existence / Valuation	Obsolescence; count errors	Mod	Observation / count procedures; NRV testing	INV-1
Cash — Existence	Misstatement of cash / reconciling items	Low–Mod	Bank confirm; recon testing	CA-1
Management override	Journal entry fraud risk (AU-C 240)	Sig (presumed)	JE testing; estimates bias; unpredictable procedures	F-2

Linkage

Significant estimates (allowance, inventory NRV) are inventoried on A-26 and linked to this matrix. Sampling design (when used) is documented on A-25 / A-17 with evaluation against performance materiality $138,750.

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