Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p6
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 6/63)
Character Range: 27970–31371

or designs, and applies, the methods used, including the use of models; (Ref: Para. A38–A39)

                      ii                    Selects the assumptions to be used, including consideration of alternatives, and identifies significant assumptions; and (Ref: Para. A40–A43)

                      iii                  Selects the data to be used; (Ref: Para. A44)

                                          Understands the degree of estimation uncertainty, including through considering the range of possible measurement outcomes; and (Ref: Para. A45)

                                          Addresses the estimation uncertainty, including selecting a point estimate and related disclosures for inclusion in the financial report. (Ref: Para. A46–A49)

(i)                 Identified controls in the control activities component[9] over management's process for making accounting estimates as described in paragraph 13(h)(ii). (Ref: Para. A50–A54)

(j)                 How management reviews the outcome(s) of previous accounting estimates and responds to the results of that review.

14.               The auditor shall review the outcome of previous accounting estimates, or, where applicable, their subsequent re‑estimation to assist in identifying and assessing the risks of material misstatement in the current period. The auditor shall take into account the characteristics of the accounting estimates in determining the nature and extent of that review. The review is not intended to call into question judgements about previous period accounting estimates that were appropriate based on the information available at the time they were made. (Ref: Para. A55–A60)

15.               With respect to accounting estimates, the auditor shall determine whether the engagement team requires specialised skills or knowledge to perform the risk assessment procedures, to identify and assess the risks of material misstatement, to design and perform audit procedures to respond to those risks, or to evaluate the audit evidence obtained. (Ref: Para. A61–A63)

Identifying and Assessing the Risks of Material Misstatement

16.               In identifying and assessing the risks of material misstatement relating to an accounting estimate and related disclosures at the assertion level, including separately assessing inherent risk and control risk at the assertion level, as required by ASA 315,[10] the auditor shall take the following into account in identifying the risks of material misstatement and in assessing inherent risk: (Ref: Para. A64–A71)

(a)                The degree to which the accounting estimate is subject to estimation uncertainty; and (Ref: Para. A72–A75)

(b)                The degree to which the following are affected by complexity, subjectivity, or other inherent risk factors: (Ref: Para. A76–A79)

(i)                 The selection and application of the method, assumptions and data in making the accounting estimate; or

(ii)               The selection of management's point estimate and related disclosures for inclusion in the financial report.

17.               The auditor shall determine whether any of the risks of material misstatement identified and assessed in accordance with paragraph 16 are, in the auditor's judgement, a significant risk.[11] If the auditor has determined that a significant risk exists, the auditor shall identify controls that