Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p45
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 133576–136780

of the policies or procedures by entity's personnel; or

           * Selecting transactions and tracing them through the applicable process in the information system (i.e., performing a walk-through).

Automated tools and techniques

A137.      The auditor may also use automated techniques to obtain direct access to, or a digital download from, the databases in the entity's information system that store accounting records of transactions.  By applying automated tools or techniques to this information, the auditor may confirm the understanding obtained about how transactions flow through the information system by tracing journal entries, or other digital records related to a particular transaction, or an entire population of transactions, from initiation in the accounting records through to recording in the general ledger.  Analysis of complete or large sets of transactions may also result in the identification of variations from the normal, or expected, processing procedures for these transactions, which may result in the identification of risks of material misstatement.

Information obtained from outside of the general and subsidiary ledgers

A138.      Financial reports may contain information that is obtained from outside of the general and subsidiary ledgers.  Examples of such information that the auditor may consider include:

           * Information obtained from lease agreements relevant to disclosures in the financial report.

           * Information disclosed in the financial report that is produced by an entity's risk management system.

           * Fair value information produced by management's experts and disclosed in the financial report.

           * Information disclosed in the financial report that has been obtained from models, or from other calculations used to develop accounting estimates recognised or disclosed in the financial report, including information relating to the underlying data and assumptions used in those models, such as:

                   + Assumptions developed internally that may affect an asset's useful life; or

                   + Data such as interest rates that are affected by factors outside the control of the entity.

           * Information disclosed in the financial report about sensitivity analyses derived from financial models that demonstrates that management has considered alternative assumptions.

           * Information recognised or disclosed in the financial report that has been obtained from an entity's tax returns and records.

           * Information disclosed in the financial report that has been obtained from analyses prepared to support management's assessment of the entity's ability to continue as a going concern, such as disclosures, if any, related to events or conditions that have been identified that may cast significant doubt on the entity's ability to continue as a going concern.[38]

A139.      Certain amounts or disclosures in the entity's financial report (such as disclosures about credit risk, liquidity risk, and market risk) may be based on information obtained from the entity's risk management system.  However, the auditor is not required to understand all aspects