Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p4
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 4/63)
Character Range: 21820–25126

Similarly, the exercise of professional scepticism is important when there is greater susceptibility to misstatement due to management bias or other fraud risk factors insofar as they affect inherent risk. (Ref: Para. A11)

9.                   This Auditing Standard requires the auditor to evaluate, based on the audit procedures performed and the audit evidence obtained, whether the accounting estimates and related disclosures are reasonable[7] in the context of the applicable financial reporting framework, or are misstated. For purposes of this Auditing Standard, reasonable in the context of the applicable financial reporting framework means that the relevant requirements of the applicable financial reporting framework have been applied appropriately, including those that address: (Ref: Para. A12–A13, A139–A144)

           * The making of the accounting estimate, including the selection of the method, assumptions and data in view of the nature of the accounting estimate and the facts and circumstances of the entity;

           * The selection of management's point estimate; and

           * The disclosures about the accounting estimate, including disclosures about how the accounting estimate was developed and that explain the nature, extent, and sources of estimation uncertainty.

Effective Date

10.               [Deleted by the AUASB. Refer Aus 0.3]

Objective

11.               The objective of the auditor is to obtain sufficient appropriate audit evidence about whether accounting estimates and related disclosures in the financial report are reasonable in the context of the applicable financial reporting framework.

Definitions

12.               For the purposes of this Auditing Standard, the following terms have the meanings attributed below:

(a)                Accounting estimate – A monetary amount for which the measurement, in accordance with the requirements of the applicable financial reporting framework, is subject to estimation uncertainty. (Ref: Para. A14)

(b)                Auditor's point estimate or auditor's range – An amount, or range of amounts, respectively, developed by the auditor in evaluating management's point estimate. (Ref: Para. A15)

(c)                Estimation uncertainty – Susceptibility to an inherent lack of precision in measurement. (Ref: Para. A16, Appendix 1)

(d)                Management bias – A lack of neutrality by management in the preparation of information. (Ref: Para. A17)

(e)                Management's point estimate – The amount selected by management for recognition or disclosure in the financial report as an accounting estimate.

(f)                 Outcome of an accounting estimate – The actual monetary amount that results from the resolution of the transaction(s), event(s) or condition(s) addressed by an accounting estimate. (Ref: Para. A18)

Requirements

Risk Assessment Procedures and Related Activities

13.               When obtaining an understanding of the entity and its environment, the applicable financial reporting framework and the entity's system of internal control, as required by ASA 315,[8] the auditor shall obtain an understanding of the following matters related to the entity's accounting estimates. The auditor's procedures to obtain the understanding shall be performed