Document ID: chunk:federal_register_of_legislation:F2021C01254:reg:5:p8
Version: federal_register_of_legislation:F2021C01254
Segment Type: reg
Provision Reference: reg 5 (pt 8/11)
Character Range: 25710–28766

where the litigation is at an early stage.

(c) Due to material uncertainties, the entity's legal counsel may be unable to form a conclusion to corroborate management's representations regarding outstanding litigation and claims.

Alternative Audit Procedures (Ref: Para. 6(b))

Aus A8.9 Where the auditor has not obtained sufficient appropriate audit evidence as to a material financial report assertion regarding litigation and claims, under ASA 330, the auditor needs to consider whether alternative audit procedures can provide further audit evidence.  Alternative audit procedures may include:

(a) further enquiries of management or those charged with governance, about for instance the processes, procedures and assumptions they implement, adopt or make to ensure litigation and claims are recognised and disclosed in accordance with the applicable financial reporting framework;

(b) where possible, making arrangements to discuss litigation and claims with management and the entity's legal counsel;

(c) further review of documents in management's possession concerning litigation and claims, including the entity's board minutes; and

(d) further examination of accounts rendered by the entity's external legal counsel.

Aus A8.10 The auditor may also consider any relevant legislation to assist in obtaining information about litigation and claims, including, for example:

      * Section 310 of the Corporations Act 2001 which entitles the auditor to a right of access at all reasonable times to the books of a company, registered scheme or disclosing entity, and to require from any officer information, explanations or other assistance for the purposes of the audit or review.

      * When the entity is a disclosing entity, whether disclosure of any litigation and claims has been made in accordance with the continuous disclosure requirements under sections 674 or 675 of the Corporations Act 2001.

Other Audit Reporting Considerations (Ref: Para. 6)

Aus A8.11 In those circumstances where, due to uncertainties, the entity's legal counsel is unable to form a conclusion to corroborate management's representation, the auditor needs to consider the effect on the auditor's report arising from the extent of disclosure of the uncertainty in the financial report:

(a) where the auditor considers that the disclosure of the uncertainty in the financial report is adequate, the auditor needs to consider including an Emphasis of Matter paragraph; in accordance with ASA 706, or

(b) if in the auditor's opinion the disclosure of the uncertainty is inadequate or unreliable, a modified opinion needs to be expressed in accordance with ASA 705.

Written Representations (Ref: Para.7)

Aus A8.12 ASA 580 deals with the auditor's responsibility to obtain written representations from management and, where appropriate, those charged with governance, in an audit of a financial report.  Appendix 2 of that Standard provides an illustrative example of a representation letter.

Aus A8.13 As management is the primary source of information