Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p62
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 181058–184295

possible under applicable law or regulation.

Considerations Specific to Public Sector Entities

A200.      For public sector entities, the identification of risks at the financial report level may include consideration of matters related to the political climate, public interest and program sensitivity.

Risks of Material Misstatement at the Assertion Level (Ref: Para. 28(b))
Appendix 2 sets out examples, in the context of inherent risk factors, of events or conditions that may indicate susceptibility to misstatement that may be material.

A201.      Risks of material misstatements that do not relate pervasively to the financial report are risks of material misstatement at the assertion level.

Relevant Assertions and Significant Classes of Transactions, Account Balances and Disclosures (Ref: Para. 29)

Why Relevant Assertions and Significant Classes of Transactions, Account Balances and Disclosures Are Determined

A202.      Determining relevant assertions and the significant classes of transactions, account balances and disclosures provides the basis for the scope of the auditor's understanding of the entity's information system required to be obtained in accordance with paragraph 25(a).  This understanding may further assist the auditor in identifying and assessing risks of material misstatement (see A86).

Automated Tools and Techniques

A203.      The auditor may use automated techniques to assist in the identification of significant classes of transactions, account balances and disclosures.
Examples:

      * An entire population of transactions may be analysed using automated tools and techniques to understand their nature, source, size and volume.  By applying automated techniques, the auditor may, for example, identify that an account with a zero balance at period end was comprised of numerous offsetting transactions and journal entries occurring during the period, indicating that the account balance or class of transactions may be significant (e.g., a payroll clearing account).  This same payroll clearing account may also identify expense re-imbursements to management (and other employees), which could be a significant disclosure due to these payments being made to related parties.

      * By analysing the flows of an entire population of revenue transactions, the auditor may more easily identify a significant class of transactions that had not previously been identified.

Disclosures that May Be Significant

A204.      Significant disclosures include both quantitative and qualitative disclosures for which there is one or more relevant assertions.  Examples of disclosures that have qualitative aspects and that may have relevant assertions and may therefore be considered significant by the auditor include disclosures about:

           * Liquidity and debt covenants of an entity in financial distress.

           * Events or circumstances that have led to the recognition of an impairment loss.

           * Key sources of estimation uncertainty, including assumptions about the future.

           * The nature of a change in accounting policy, and other relevant disclosures required by the applicable financial reporting framework, where, for example, new financial