Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p43
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 120304–123316

audit procedures in accordance with paragraph 18 are responsive to those reasons.

171.           Existing paragraph A68 is amended to read as follows:

The relevance and significance of inherent risk factors may vary from one estimate to another.  Accordingly, the inherent risk factors may, either individually or in combination, affect simple accounting estimates to a lesser degree and the auditor may identify fewer risks or assess inherent risk at close to the lower end of the spectrum of inherent risk.

172.           Existing paragraph A70 is amended to read as follows:

Events occurring after the date of the financial report may provide additional information relevant to the auditor's assessment of the risks of material misstatement at the assertion level.  For example, the outcome of an accounting estimate may become known during the audit.  In such cases, the auditor may assess or revise the assessment of the risks of material misstatement at the assertion level,[48] regardless of how the inherent risk factors affect susceptibility of assertions to misstatement relating to degree to which the accounting estimate.  was subject to, or affected by, estimation uncertainty, complexity, subjectivity or other inherent risk factors.  Events occurring after the date of the financial report also may influence the auditor's selection of the approach to testing the accounting estimate in accordance with paragraph 18.  For example, for a simple bonus accrual that is based on a straightforward percentage of compensation for selected employees, the auditor may conclude that there is relatively little complexity or subjectivity in making the accounting estimate, and therefore may assess inherent risk at the assertion level at close to the lower end of the spectrum of inherent risk.  The payment of the bonuses subsequent to period end may provide sufficient appropriate audit evidence regarding the assessed risks of material misstatement at the assertion level.

173.           Existing paragraph A79 is amended to read as follows:

The degree of subjectivity associated with an accounting estimate influences the susceptibility of the accounting estimate to misstatement due to management bias or fraud other fraud risk factors insofar as they affect inherent risk.  For example, when an accounting estimate is subject to a high degree of subjectivity, the accounting estimate is likely to be more susceptible to misstatement due to management bias or fraud and this may result in a wide range of possible measurement outcomes.  Management may select a point estimate from that range that is inappropriate in the circumstances, or that is inappropriately influenced by unintentional or intentional management bias, and that is therefore misstated.  For continuing audits, indicators of possible management bias identified during the audit of preceding periods may influence the planning and risk assessment procedures in the current period.

174.           Existing section heading before