Document ID: chunk:federal_register_of_legislation:F2022C01186:reg:14:p21
Version: federal_register_of_legislation:F2022C01186
Segment Type: reg
Provision Reference: reg 14 (pt 21/30)
Character Range: 71651–74702

judgement by management in applying the requirements of the entity's applicable financial reporting framework to the facts and circumstances of the entity.  In addition, many financial report items involve subjective decisions or assessments or a degree of uncertainty, and there may be a range of acceptable interpretations or judgements that may be made.  Consequently, some financial report items are subject to an inherent level of variability which cannot be eliminated by the application of additional auditing procedures.  For example, this is often the case with respect to certain accounting estimates.  Nevertheless, the Australian Auditing Standards require the auditor to give specific consideration to whether accounting estimates are reasonable in the context of the applicable financial reporting framework and related disclosures, and to the qualitative aspects of the entity's accounting practices, including indicators of possible bias in management's judgements.[24]

The Nature of Audit Procedures

A52.         There are practical and legal limitations on the auditor's ability to obtain audit evidence.  For example:

           * There is the possibility that management or others may not provide, intentionally or unintentionally, the complete information that is relevant to the preparation of the financial report or that has been requested by the auditor.  Accordingly, the auditor cannot be certain of the completeness of information, even though the auditor has performed audit procedures to obtain assurance that all relevant information has been obtained.

           * Fraud may involve sophisticated and carefully organised schemes designed to conceal it.  Therefore, audit procedures used to gather audit evidence may be ineffective for detecting an intentional misstatement that involves, for example, collusion to falsify documentation which may cause the auditor to believe that audit evidence is valid when it is not.  The auditor is neither trained as, nor expected to be, an expert in the authentication of documents.

           * An audit is not an official investigation into alleged wrongdoing.  Accordingly, the auditor is not given specific legal powers, such as the power of search, which may be necessary for such an investigation.

Timeliness of Financial Reporting and the Balance between Benefit and Cost

A53.         The matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive.  Appropriate planning assists in making sufficient time and resources available for the conduct of the audit.  Notwithstanding this, the relevance of information, and thereby its value, tends to diminish over time, and there is a balance to be struck between the reliability of information and its cost.  This is recognised in certain financial reporting frameworks (see, for example, the AASB's Framework for the Preparation and Presentation of Financial