Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p22
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 22/41)
Character Range: 72607–75746

electronic transaction files.

                   + The auditor may design procedures to obtain additional corroborative information.  For example, if the auditor identifies that management is under pressure to meet earnings expectations, there may be a related risk that management is inflating sales by entering into sales agreements that include terms that preclude revenue recognition or by invoicing sales before delivery.  In these circumstances, the auditor may, for example, design external confirmations not only to confirm outstanding amounts, but also to confirm the details of the sales agreements, including date, any rights of return and delivery terms.  In addition, the auditor might find it effective to supplement such external confirmations with enquiries of non‑financial personnel in the entity regarding any changes in sales agreements and delivery terms.

           * The timing of substantive procedures may need to be modified.  The auditor may conclude that performing substantive testing at or near the period end better addresses an assessed risk of material misstatement due to fraud.  The auditor may conclude that, given the assessed risks of intentional misstatement or manipulation, audit procedures to extend audit conclusions from an interim date to the period end would not be effective.  In contrast, because an intentional misstatement—for example, a misstatement involving improper revenue recognition—may have been initiated in an interim period, the auditor may elect to apply substantive procedures to transactions occurring earlier in or throughout the reporting period.

           * The extent of the procedures applied reflects the assessment of the risks of material misstatement due to fraud.  For example, increasing sample sizes or performing analytical procedures at a more detailed level may be appropriate.  Also, computer‑assisted audit techniques may enable more extensive testing of electronic transactions and account files.  Such techniques can be used to select sample transactions from key electronic files, to sort transactions with specific characteristics, or to test an entire population instead of a sample.

A39.         If the auditor identifies a risk of material misstatement due to fraud that affects inventory quantities, examining the entity's inventory records may help to identify locations or items that require specific attention during or after the physical inventory count.  Such a review may lead to a decision to observe inventory counts at certain locations on an unannounced basis or to conduct inventory counts at all locations on the same date.

A40.         The auditor may identify a risk of material misstatement due to fraud affecting a number of accounts and assertions.  These may include asset valuation, estimates relating to specific transactions (such as acquisitions, restructurings, or disposals of a segment of the business), and other significant accrued liabilities (such as pension or superannuation and other post‑employment benefit obligations, or environmental remediation liabilities).  The risk may also relate to significant changes