Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p42
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 42/63)
Character Range: 132482–135694

obtained about management's intent and ability is a matter of professional judgement. When applicable, the auditor's procedures may include the following:

           * Review of management's history of carrying out its stated intentions.

           * Inspection of written plans and other documentation, including, when applicable, formally approved budgets, authorisations or minutes.

           * Enquiry of management about its reasons for a particular course of action.

           * Review of events occurring subsequent to the date of the financial report and up to the date of the auditor's report.

           * Evaluation of the entity's ability to carry out a particular course of action given the entity's economic circumstances, including the implications of its existing commitments and legal, regulatory, or contractual restrictions that could affect the feasibility of management's actions.

           * Consideration of whether management has met the applicable documentation requirements, if any, of the applicable financial reporting framework.

Certain financial reporting frameworks, however, may not permit management's intentions or plans to be taken into account when making an accounting estimate. This is often the case for fair value accounting estimates because their measurement objective requires that significant assumptions reflect those used by marketplace participants.

Data (Ref: Para. 25(a))

A106.      Relevant considerations for the auditor regarding the appropriateness of the data selected for use in the context of the applicable financial reporting framework, and, if applicable, the appropriateness of the changes from the prior period may include:

           * Management's rationale for the selection of the data;

           * Whether the data is appropriate in the circumstances given the nature of the accounting estimate, the requirements of the applicable financial reporting framework, and the business, industry and environment in which the entity operates; and

           * Whether the change from prior periods in the sources or items of data selected or data selected, is based on new circumstances or new information. When it is not, it is unlikely to be reasonable nor in compliance with the applicable financial reporting framework. Arbitrary changes in an accounting estimate result in inconsistent financial report over time and may give rise to financial statement misstatements or may be an indicator of possible management bias (see paragraphs A133–A136).

Relevance and reliability of the data (Ref: Para. 25(c))

A107.      When using information produced by the entity, ASA 500 requires the auditor to evaluate whether the information is sufficiently reliable for the auditor's purposes, including as necessary in the circumstances, to obtain audit evidence about the accuracy and completeness of the information and evaluating whether the information is sufficiently precise and detailed for the auditor's purposes.[56]

Complex legal or contractual terms (Ref: Para. 25(d))

A108.      Procedures that the auditor may consider when the accounting estimate is based on complex legal or contractual terms include:

           * Considering