Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p51
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 51/63)
Character Range: 158672–161860

A139.       In determining whether, based on the audit procedures performed and evidence obtained, management's point estimate and related disclosures are reasonable, or are misstated:

           * When the audit evidence supports a range, the size of the range may be wide and, in some circumstances, may be multiples of materiality for the financial report as a whole (see also paragraph A125). Although a wide range may be appropriate in the circumstances, it may indicate that it is important for the auditor to reconsider whether sufficient appropriate audit evidence has been obtained regarding the reasonableness of the amounts within the range.

           * The audit evidence may support a point estimate that differs from management's point estimate. In such circumstances, the difference between the auditor's point estimate and management's point estimate constitutes a misstatement.

           * The audit evidence may support a range that does not include management's point estimate. In such circumstances, the misstatement is the difference between management's point estimate and the nearest point of the auditor's range.

A140.      Paragraphs A110–A114 provide guidance to assist the auditor in evaluating management's selection of a point estimate and related disclosures to be included in the financial report.

A141.      When the auditor's further audit procedures include testing how management made the accounting estimate or developing an auditor's point estimate or range, the auditor is required to obtain sufficient appropriate audit evidence about disclosures that describe estimation uncertainty in accordance with paragraphs 26(b) and 29(b) and other disclosures in accordance with paragraph 31. The auditor then considers the audit evidence obtained about disclosures as part of the overall evaluation, in accordance with paragraph 35, of whether the accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework, or are misstated.

A142.      ASA 450 also provides guidance regarding qualitative disclosures[65] and when misstatements in disclosures could be indicative of fraud.[66]

A143.      When the financial report is prepared in accordance with a fair presentation framework, the auditor's evaluation as to whether the financial report achieves fair presentation[67] includes the consideration of the overall presentation, structure and content of the financial report, and whether the financial report, including the related notes, represent the transactions and events in a manner that achieves fair presentation. For example, when an accounting estimate is subject to a higher degree of estimation uncertainty, the auditor may determine that additional disclosures are necessary to achieve fair presentation. If management does not include such additional disclosures, the auditor may conclude that the financial report is materially misstated.

A144.      ASA 705 [68] provides guidance on the implications for the auditor's opinion when the auditor believes that management's disclosures in the financial report is inadequate or misleading, including, for example, with respect