Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p54
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 54/63)
Character Range: 167572–170789

those risks, or to evaluate the audit evidence obtained. In these circumstances, the documentation also may include how the required skills or knowledge were applied.

A152.      Paragraph A7 of ASA 230 notes that, although there may be no single way in which the auditor's exercise of professional scepticism is documented, the audit documentation may nevertheless provide evidence of the auditor's exercise of professional scepticism. For example, in relation to accounting estimates, when the audit evidence obtained includes evidence that both corroborates and contradicts management's assertions, the documentation may include how the auditor evaluated that evidence, including the professional judgements made in forming a conclusion as to the sufficiency and appropriateness of the audit evidence obtained. Examples of other requirements in this Auditing Standard for which documentation may provide evidence of the exercise of professional scepticism by the auditor include:

           * Paragraph 13(d), regarding how the auditor has applied an understanding in developing the auditor's own expectation of the accounting estimates and related disclosures to be included in the entity's financial report and how that expectation compares with the entity's financial report prepared by management;

           * Paragraph 18, which requires further audit procedures to be designed and performed to obtain sufficient appropriate evidence in a manner that is not biased toward obtaining audit evidence that may be corroborative or towards excluding audit evidence that may be contradictory;

           * Paragraphs 23(b), 24(b), 25(b) and 32, which address indicators of possible management bias; and

           * Paragraph 34, which addresses the auditor's consideration of all relevant audit evidence, whether corroborative or contradictory.

Appendix 1

(Ref: Para. 2, 4, 12(c), A8, A66)

Inherent Risk Factors

Introduction
      1. In identifying, assessing and responding to the risks of material misstatement at the assertion level for an accounting estimate and related disclosures, this Auditing Standard requires the auditor to take into account the degree to which the accounting estimate is subject to estimation uncertainty, and the degree to which the selection and application of the methods, assumptions and data used in making the accounting estimate, and the selection of management's point estimate and related disclosures for inclusion in the financial report, are affected by complexity, subjectivity or other inherent risk factors.

      2. Inherent risk related to an accounting estimate is the susceptibility of an assertion about the accounting estimate to material misstatement, before consideration of controls. Inherent risk results from inherent risk factors, which give rise to challenges in appropriately making the accounting estimate. This Appendix provides further explanation about the nature of the inherent risk factors of estimation uncertainty, subjectivity and complexity, and their inter‑relationships, in the context of making accounting estimates and selecting management's point estimate and related disclosures for inclusion in the financial report.

Measurement