| 4. | For purposes of the ISAs (UK and Ireland), the following terms have the meanings attributed below: |
| (a) | Assertions – Representations by management1a, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur. |
| (b) | Business risk – A risk resulting from significant conditions, events, circumstances, actions or inactions that could adversely affect an entity's ability to achieve its objectives and execute its strategies, or from the setting of inappropriate objectives and strategies. |
| (c) | Internal control – The process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity's objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations. The term "controls" refers to any aspects of one or more of the components of internal control. |
| (d) | Risk assessment procedures – The audit procedures performed to obtain an understanding of the entity and its environment, including the entity's internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels. |
| (e) | Significant risk – An identified and assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration. |
| 1a In the UK and Ireland, those charged with governance are responsible for preparing the financial statements. |
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