Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p34
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 95062–98019

assessment is made in order to design an audit sample and to determine sample size. For example, if the expected rate of deviation is unacceptably high, the auditor will ordinarily decide not to perform tests of controls. Similarly, for tests of details, the auditor makes an assessment of the expected misstatement in the population. If the expected misstatement is high, 100% examination or use of a large sample size may be appropriate when performing tests of details.

136.           Existing Factor 1 of Appendix 2 is amended to read as follows:

An increase in the extent to which the auditor's risk assessment takes into account relevant plans to test the operating effectiveness of controls

Amendments to ASA 540

137.           Existing paragraph 4 is amended to read as follows and footnote 5 is inserted:

This Auditing Standard requires a separate assessment of inherent risk for identified risks of material misstatement at the assertion level.[5] purposes of assessing the risks of material misstatement at the assertion level for accounting estimates.  In the context of ASA 540 (Revised), and Ddepending on the nature of a particular accounting estimate, the susceptibility of an assertion to a misstatement that could be material may be subject to or affected by estimation uncertainty, complexity, subjectivity or other inherent risk factors, and the interrelationship among them.  As explained in ASA 200,[6] inherent risk is higher for some assertions and related classes of transactions, account balances and disclosures than for others.  Accordingly, the assessment of inherent risk depends on the degree to which the inherent risk factors affect the likelihood or magnitude of misstatement, and varies on a scale that is referred to in this ASA as the spectrum of inherent risk.  (Ref: Para. A8–A9, A65–A66, Appendix 1)

138.           As a result of the footnote insertion above, subsequent footnotes of this Auditing Standard are re-numbered and references to these footnotes are updated accordingly.

139.           Existing paragraph 5 is amended to read as follows:

This ASA refers to relevant requirements in ASA 315 and ASA 330, and provides related guidance, to emphasise the importance of the auditor's decisions about controls relating to accounting estimates, including decisions about whether:

           * There are controls relevant to the audit required to be identified by ASA 315 , for which the auditor is required to evaluate their design and determine whether they have been implemented.

           * To test the operating effectiveness of relevant controls.

140.           Existing paragraph 6 is amended to read as follows:

This ASA 315 also requires a separate assessment of control risk when assessing the risks of material misstatement at the assertion level for accounting estimates.  In assessing control risk, the auditor takes into account whether the auditor's further audit procedures contemplate