Document ID: chunk:federal_register_of_legislation:F2025L00107:front:0:p168
Version: federal_register_of_legislation:F2025L00107
Segment Type: other
Provision Reference: 
Character Range: 523159–526303

interpreted by management, including with respect to contractual terms.

Changes from Prior Periods Not Based on New Circumstances or New Information (Ref: Para.  146L(a)(iii), 146R(b)(i))

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 5.       When a change from prior periods in a method, significant assumption, or the data are not based on new circumstances or new information, or when significant assumptions are inconsistent with each other and with those used in other estimates, or with related assumptions used in other areas of the entity's business activities, the practitioner may need to have further discussions with management about the circumstances and, in doing so, challenge management regarding the appropriateness of the assumptions used.

Developing a Point Estimate or Range (Ref: Para. 146R(b)(ii))

A460R. Developing a point estimate or range, as applicable, to evaluate estimates and related disclosures may be an appropriate approach when, for example:

           * The practitioner's consideration of similar estimates made in the prior period suggests that management's current period process is not expected to be effective.

           * The entity's controls within and over management's processes for developing estimates are not well designed or properly implemented.

           * Events or transactions between the period end and the date of the practitioner's report have not been properly taken into account, when it is appropriate for management to do so, and such events or transactions appear to contradict management's point estimate.

           * There are appropriate alternative assumptions or sources of relevant data that can be used in developing a practitioner's point estimate or a range.

           * Management has not taken appropriate steps to understand or address the estimation uncertainty.

A461R. The practitioner may develop a point estimate or a range in a number of ways, for example, by:

           * Using a different model than the one used by management, for example, one that is commercially available for use in a particular sector or industry, or a proprietary or practitioner-developed model.

           * Using management's model but developing alternative assumptions or data sources to those used by management.

           * Using the practitioner's own method but developing alternative assumptions to those used by management.

           * Employing or engaging a person with specialised expertise to develop or execute a model, or to provide relevant assumptions.

A462R. The practitioner may also develop a point estimate or range for forward-looking information. The practitioner's decision as to whether to do so may depend on the nature of the forward-looking information and the practitioner's judgement in the circumstances. For example, as forward-looking information is subject to greater inherent uncertainty than historical information, the practitioner may choose to determine whether the disclosure presented by management is within a reasonable range of possible outcomes.

Revising the Risk Assessment in a Reasonable Assurance Engagement (Ref: Para. 147R)