Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p7
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 7/41)
Character Range: 29238–32423

present in circumstances where frauds have occurred and therefore may indicate risks of material misstatement due to fraud.  (Ref: Para. A24‑A28)

Identification and Assessment of the Risks of Material Misstatement Due to Fraud

26.               In accordance with ASA 315, the auditor shall identify and assess the risks of material misstatement due to fraud at the financial report level, and at the assertion level for classes of transactions, account balances and disclosures.[8]

27.               When identifying and assessing the risks of material misstatement due to fraud, the auditor shall, based on a presumption that there are risks of fraud in revenue recognition, evaluate which types of revenue, revenue transactions or assertions give rise to such risks.  Paragraph 48 of this Auditing Standard specifies the documentation required where the auditor concludes that the presumption is not applicable in the circumstances of the engagement and, accordingly, has not identified revenue recognition as a risk of material misstatement due to fraud.  (Ref: Para. A29‑A31)

28.               The auditor shall treat those assessed risks of material misstatement due to fraud as significant risks and accordingly, to the extent not already done so, the auditor shall identify the entity's controls that address such risks, and evaluate their design and determine whether they have been implemented).[9]  (Ref: Para. A32‑A33)

Responses to the Assessed Risks of Material Misstatement Due to Fraud

Overall Responses

29.               In accordance with ASA 330, the auditor shall determine overall responses to address the assessed risks of material misstatement due to fraud at the financial report level.[10] (Ref: Para. A34)

30.               In determining overall responses to address the assessed risks of material misstatement due to fraud at the financial report level, the auditor shall:

         (a)                Assign and supervise personnel taking account of the knowledge, skill and ability of the individuals to be given significant engagement responsibilities and the auditor's assessment of the risks of material misstatement due to fraud for the engagement; (Ref: Para. A35‑A36)

         (b)                Evaluate whether the selection and application of accounting policies by the entity, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting resulting from management's effort to manage earnings; and

         (c)                Incorporate an element of unpredictability in the selection of the nature, timing and extent of audit procedures.  (Ref: Para. A37)

Audit Procedures Responsive to Assessed Risks of Material Misstatement Due to Fraud at the Assertion Level

31.               In accordance with ASA 330, the auditor shall design and perform further audit procedures whose nature, timing and extent are responsive to the assessed risks of material misstatement due to fraud at the assertion level.[11]  (Ref: Para. A38‑A41)

Audit Procedures Responsive to Risks Related to Management Override of Controls

32.               Management is in a unique position