Document ID: chunk:federal_register_of_legislation:F2022C01186:reg:14:p3
Version: federal_register_of_legislation:F2022C01186
Segment Type: reg
Provision Reference: reg 14 (pt 3/30)
Character Range: 19617–22648

of the auditor to ensure compliance with all relevant legal, regulatory or professional obligations.

An Audit of a Financial Report

3.                   The purpose of an audit is to enhance the degree of confidence of intended users in the financial report.  This is achieved by the expression of an opinion by the auditor on whether the financial report is prepared, in all material respects, in accordance with an applicable financial reporting framework.  In the case of most general purpose frameworks, that opinion is on whether the financial report is presented fairly, in all material respects, or gives a true and fair view in accordance with the framework.  An audit conducted in accordance with Australian Auditing Standards and relevant ethical requirements enables the auditor to form that opinion.  (Ref: Para. A4)

4.                   The financial report subject to audit is that of the entity, prepared by management of the entity with oversight from those charged with governance.  Australian Auditing Standards do not impose responsibilities on management or those charged with governance and do not override laws and regulations that govern their responsibilities.  However, an audit in accordance with Australian Auditing Standards is conducted on the premise that management and, where appropriate, those charged with governance have acknowledged certain responsibilities that are fundamental to the conduct of the audit.  The audit of the financial report does not relieve management or those charged with governance of their responsibilities.  (Ref: Para. A5‑A14)

5.                   As the basis for the auditor's opinion, Australian Auditing Standards require the auditor to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error.  Reasonable assurance is a high level of assurance.  It is obtained when the auditor has obtained sufficient appropriate audit evidence to reduce audit risk (that is, the risk that the auditor expresses an inappropriate opinion when the financial report is materially misstated) to an acceptably low level.  However, reasonable assurance is not an absolute level of assurance, because there are inherent limitations of an audit which result in most of the audit evidence on which the auditor draws conclusions and bases the auditor's opinion being persuasive rather than conclusive.  (Ref: Para. A31‑A57)

6.                   The concept of materiality is applied by the auditor both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial report.[1]  In general, misstatements, including omissions, are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.  Judgements about materiality are made in the light of surrounding circumstances,