Document ID: chunk:federal_register_of_legislation:F2023C01133:reg:7:p13
Version: federal_register_of_legislation:F2023C01133
Segment Type: reg
Provision Reference: reg 7 (pt 13/17)
Character Range: 40587–43677

and evaluating the audit evidence, the external auditor will need to perform more procedures directly in accordance with paragraph 18 of this Auditing Standard, because using the work of the internal audit function alone will not provide the external auditor with sufficient appropriate audit evidence.

A19.         Since the external auditor has sole responsibility for the audit opinion expressed, the external auditor needs to make the significant judgements in the audit engagement in accordance with paragraph 18.  Significant judgements include the following:

           * Assessing the risks of material misstatement.

           * Evaluating the sufficiency of tests performed.

           * Evaluating the appropriateness of management's use of the going concern assumption.

           * Evaluating significant accounting estimates.

           * Evaluating the adequacy of disclosures in the financial report, and other matters affecting the auditor's report.

Assessed risk of material misstatement  (Ref: Para. 18(b))

A20.         For a particular account balance, class of transaction or disclosure, the higher an assessed risk of material misstatement at the assertion level, the more judgement is often involved in planning and performing the audit procedures and evaluating the results thereof.  In such circumstances, the external auditor will need to perform more procedures directly in accordance with paragraph 18 of this Auditing Standard, and accordingly, make less use of the work of the internal audit function in obtaining sufficient appropriate audit evidence.  Furthermore, as explained in ASA 200,[19] the higher the assessed risks of material misstatement, the more persuasive the audit evidence required by the external auditor will need to be, and, therefore, the external auditor will need to perform more of the work directly.

A21.         As explained in ASA 315,[20] significant risks are risks assessed close to the upper end of the spectrum of inherent risk and therefore the external auditor's ability to use the work of the internal audit function in relation to significant risks will be restricted to procedures that involve limited judgement.  In addition, where the risks of material misstatement is other than low, the use of the work of the internal audit function alone is unlikely to reduce audit risk to an acceptably low level and eliminate the need for the external auditor to perform some tests directly.

A22.         Carrying out procedures in accordance with this Auditing Standard may cause the external auditor to re-evaluate the external auditor's assessment of the risks of material misstatement.  Consequently, this may affect the external auditor's determination of whether to use the work of the internal audit function and whether further application of this Auditing Standard is necessary.

Communication with Those Charged with Governance  (Ref: Para. 20)

A23.         In accordance with ASA 260,[21] the external auditor is required to communicate with those charged with governance an overview of the planned scope and