Document ID: chunk:federal_register_of_legislation:F2021C01250:reg:27:p5
Version: federal_register_of_legislation:F2021C01250
Segment Type: reg
Provision Reference: reg 27 (pt 5/23)
Character Range: 21225–24571

controls in the subsequent two audit periods. (Ref: Para. A38-A40)

Controls over significant risks

15.               If the auditor intends to rely on controls over a risk the auditor has determined to be a significant risk, the auditor shall test those controls in the current period.

Evaluating the Operating Effectiveness of Controls

16.               When evaluating the operating effectiveness of controls upon which the auditor intends to rely, the auditor shall evaluate whether misstatements that have been detected by substantive procedures indicate that controls are not operating effectively.  The absence of misstatements detected by substantive procedures, however, does not provide audit evidence that controls related to the assertion being tested are effective. (Ref: Para. A41)

17.               If deviations from controls upon which the auditor intends to rely are detected, the auditor shall make specific enquiries to understand these matters and their potential consequences, and shall determine whether: (Ref: Para. A42)

(a)                The tests of controls that have been performed provide an appropriate basis for reliance on the controls;

(b)                Additional tests of controls are necessary; or

(c)                The risks of material misstatement need to be addressed using substantive procedures.

Substantive Procedures

18.               Irrespective of the assessed risks of material misstatement, the auditor shall design and perform substantive procedures for each material class of transactions, account balance, and disclosure. (Ref: Para. A43-A49)

19.               The auditor shall consider whether external confirmation procedures are to be performed as substantive audit procedures. (Ref: Para. A50-A53)

Substantive Procedures Related to the Financial Report Closing Process

20.               The auditor's substantive procedures shall include the following audit procedures related to the financial report closing process:

(a)                Agreeing or reconciling information in the financial report with the underlying accounting records, including agreeing or reconciling information in disclosures, whether such information is obtained from within or outside of the general and subsidiary ledgers; and

(b)                Examining material journal entries and other adjustments made during the course of preparing the financial report. (Ref: Para. A54)

Substantive Procedures Responsive to Significant Risks

21.               If the auditor has determined that an assessed risk of material misstatement at the assertion level is a significant risk, the auditor shall perform substantive procedures that are specifically responsive to that risk.  When the approach to a significant risk consists only of substantive procedures, those procedures shall include tests of details. (Ref: Para. A55)

22.               If substantive procedures are performed at an interim date, the auditor shall cover the remaining period by performing:

(a)                substantive procedures, combined with tests of controls for the intervening period; or

(b)                if the auditor determines that it is sufficient, further substantive procedures only,

    that provide a reasonable basis for extending the audit conclusions from the interim date to the period end. (Ref: Para.