Document ID: chunk:federal_register_of_legislation:F2021C01244:reg:1:p6
Version: federal_register_of_legislation:F2021C01244
Segment Type: reg
Provision Reference: reg 1 (pt 6/7)
Character Range: 20316–23554

unit sales in conjunction with tests of the operating effectiveness of controls over the processing of sales invoices.  Alternatively, the auditor may consider whether the information was subjected to audit testing.  ASA 500 establishes requirements and provides guidance in determining the audit procedures to be performed on the information to be used for substantive analytical procedures.[5]

A14.         The matters discussed in paragraphs A12(a)-A12(d) are relevant irrespective of whether the auditor performs substantive analytical procedures on the entity's period end financial report, or at an interim date and plans to perform substantive analytical procedures for the remaining period.  ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[6]

Evaluation Whether the Expectation Is Sufficiently Precise (Ref: Para. 5(c))

A15.         Matters relevant to the auditor's evaluation of whether the expectation can be developed sufficiently precisely to identify a misstatement that, when aggregated with other misstatements, may cause the financial report to be materially misstated, include:

           * The accuracy with which the expected results of substantive analytical procedures can be predicted.  For example, the auditor may expect greater consistency in comparing gross profit margins from one period to another than in comparing discretionary expenses, such as research or advertising.

           * The degree to which information can be disaggregated.  For example, substantive analytical procedures may be more effective when applied to financial information on individual sections of an operation or to financial reports of components of a diversified entity, than when applied to the financial report of the entity as a whole.

           * The availability of the information, both financial and
             non-financial.  For example, the auditor may consider whether financial information, such as budgets or forecasts, and non-financial information, such as the number of units produced or sold, is available to design substantive analytical procedures.  If the information is available, the auditor may also consider the reliability of the information as discussed in paragraphs A12-A13 above.

Amount of Difference of Recorded Amounts from Expected Values that Is Acceptable (Ref: Para. 5(d))

A16.         The auditor's determination of the amount of difference from the expectation that can be accepted without further investigation is influenced by materiality[7] and the consistency with the desired level of assurance, taking account of the possibility that a misstatement, individually or when aggregated with other misstatements, may cause the financial report to be materially misstated.  ASA 330 requires the auditor to obtain more persuasive audit evidence the higher the auditor's assessment of risk.[8]  Accordingly, as the assessed risk increases, the amount of difference considered acceptable without investigation decreases in order to achieve the desired level of persuasive evidence.[9]

Analytical Procedures that Assist When Forming an Overall Conclusion (Ref: Para. 6)

A17.         The conclusions drawn from the results