Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p11
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 11/63)
Character Range: 43061–46443

indicators of possible management bias are identified, the auditor shall evaluate the implications for the audit. Where there is intention to mislead, management bias is fraudulent in nature. (Ref: Para. A133–A136)

Overall Evaluation Based on Audit Procedures Performed

33.               In applying ASA 330 to accounting estimates,[21] the auditor shall evaluate, based on the audit procedures performed and audit evidence obtained, whether: (Ref: Para A137–A138)

(a)                The assessments of the risks of material misstatement at the assertion level remain appropriate, including when indicators of possible management bias have been identified;

(b)                Management's decisions relating to the recognition, measurement, presentation and disclosure of these accounting estimates in the financial report are in accordance with the applicable financial reporting framework; and

(c)                Sufficient appropriate audit evidence has been obtained.

34.               In making the evaluation required by paragraph 33(c), the auditor shall take into account all relevant audit evidence obtained, whether corroborative or contradictory.[22] If the auditor is unable to obtain sufficient appropriate audit evidence, the auditor shall evaluate the implications for the audit or the auditor's opinion on the financial report in accordance with ASA 705.[23]

Determining Whether the Accounting Estimates are Reasonable or Misstated

35.               The auditor shall determine whether the accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework, or are misstated. ASA 450[24] provides guidance on how the auditor may distinguish misstatements (whether factual, judgemental, or projected) for the auditor's evaluation of the effect of uncorrected misstatements on the financial report. (Ref: Para. A12–A13, A139–A144)

36.               In relation to accounting estimates, the auditor shall evaluate:

(a)                In the case of a fair presentation framework, whether management has included disclosures, beyond those specifically required by the framework, that are necessary to achieve the fair presentation of the financial report as a whole;[25] or

(b)                In the case of a compliance framework, whether the disclosures are those that are necessary for the financial report not to be misleading.[26]

Written Representations

37.               The auditor shall request written representations from management[27] and, when appropriate, those charged with governance about whether the methods, significant assumptions and the data used in making the accounting estimates and the related disclosures are appropriate to achieve recognition, measurement or disclosure that is in accordance with the applicable financial reporting framework. The auditor shall also consider the need to obtain representations about specific accounting estimates, including in relation to the methods, assumptions, or data used. (Ref: Para. A145)

Communication with Those Charged With Governance, Management, or Other Relevant Parties

38.               In applying ASA 260[28] and ASA 265,[29] the auditor is required to communicate with those charged with governance or management about certain matters, including significant qualitative aspects of the entity's accounting practices and