Document ID: chunk:federal_register_of_legislation:F2023C01125:body:0:p13
Version: federal_register_of_legislation:F2023C01125
Segment Type: other
Provision Reference: 
Character Range: 35954–39127

in paragraph 6(b)).  Non‑compliance with laws and regulations that have a fundamental effect on the operations of the entity may cause the entity to cease operations, or call into question the entity's continuance as a going concern.[12] For example, non‑compliance with the requirements of the entity's license or other entitlement to perform its operations could have such an impact (e.g., for a bank, non‑compliance with capital or investment requirements).  There are also many laws and regulations relating principally to the operating aspects of the entity that typically do not affect the financial report and are not captured by the entity's information systems relevant to financial reporting.

A14.         As the financial reporting consequences of other laws and regulations can vary depending on the entity's operations, the audit procedures required by paragraph 15 are directed to bringing to the auditor's attention instances of non‑compliance with laws and regulations that may have a material effect on the financial report.

Non‑Compliance Brought to the Auditor's Attention by Other Audit Procedures (Ref: Para. 16)

A15.         Audit procedures applied to form an opinion on the financial report may bring instances of non‑compliance or suspected non‑compliance with laws and regulations to the auditor's attention.  For example, such audit procedures may include:

           * Reading minutes;

           * Enquiring of the entity's management and in‑house legal counsel or external legal counsel concerning litigation, claims and assessments; and

           * Performing substantive tests of details of classes of transactions, account balances or disclosures.

Written Representations (Ref: Para. 17)

A16.         Because the effect on a financial report of laws and regulations can vary considerably, written representations provide necessary audit evidence about management's knowledge of identified or suspected non‑compliance with laws and regulations, whose effects may have a material effect on the financial report.  However, written representations do not provide sufficient appropriate audit evidence on their own and, accordingly, do not affect the nature and extent of other audit evidence that is to be obtained by the auditor.[13]

Audit Procedures When Non‑Compliance Is Identified or Suspected

Indications of Non‑Compliance with Laws and Regulations (Ref: Para. 19)

A17.         The auditor may become aware of information concerning an instance of non‑compliance with laws and regulations other than as a result of performing the procedures in paragraphs 13–17 (e.g., when the auditor is alerted to non‑compliance by a whistle blower).

A18.         The following matters may be an indication of non‑compliance with laws and regulations:

           * Investigations by regulatory organisations and government departments or payment of fines or penalties.

           * Payments for unspecified services or loans to consultants, related parties, employees or government employees.

           * Sales commissions or agent's fees that appear excessive in relation to those ordinarily paid by the entity or in its industry or to