Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p39
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 109141–112204

read as The Entity's System of Internal Control Relevant to the Audit

155.           Existing paragraph A28 is amended to read as follows:

In applying ASA 315,[35] the auditor's understanding of the nature and extent of oversight and governance that the entity has in place over management's process for making accounting estimates may be important to the auditor's required evaluation of as it relates to whether:

           * Management, with the oversight of those charged with governance, has created and maintained a culture of honesty and ethical behaviour; and

           * The strengths in the entity's control environment elements collectively provides an appropriate foundation for the other components of the system of internal control considering the nature and size of the entity; and whether

           * those other components are undermined by cControl deficiencies identified in the control environment undermine the other components of the system of internal control.

156.           Existing paragraph A32 is amended to read as follows:

Understanding how the entity's risk assessment process identifies and addresses risks relating to accounting estimates may assist the auditor in considering changes in:

…

           * The entity's information systems or IT environment; and

…

157.           Existing paragraph A34 is amended to read as follows:

The significant classes of transactions, events and conditions within the scope of paragraph 13(h) are the same as the significant classes of transactions, events and conditions relating to accounting estimates and related disclosures that are subject to paragraphs 25(a)18(a) and (d) of ASA 315.  In obtaining the understanding of the entity's information system as it relates to accounting estimates, the auditor may consider:

…

158.           Existing paragraph A35 is amended to read as follows:

During the audit, the auditor may identify classes of transactions, events and or conditions that give rise to the need for accounting estimates and related disclosures that management failed to identify.  ASA 315 deals with circumstances where the auditor identifies risks of material misstatement that management failed to identify, including determining whether there is a significant deficiency in internal control with regard to considering the implications for the auditor's evaluation of the entity's risk assessment process.[38]

159.           Existing paragraph A39 is amended to read as follows:

Management may design and implement specific controls around models used for making accounting estimates, whether management's own model or an external model.  When the model itself has an increased level of complexity or subjectivity, such as an expected credit loss model or a fair value model using level 3 inputs, controls that address such complexity or subjectivity may be.  When complexity in relation to models is present, controls over data integrity are also more likely to be identified controls in accordance with ASA 315 relevant to the audit.  Factors that may