Document ID: chunk:federal_register_of_legislation:F2023C00337:reg:1:p6
Version: federal_register_of_legislation:F2023C00337
Segment Type: reg
Provision Reference: reg 1 (pt 6/23)
Character Range: 23816–27013

the audit engagement.

Auditor's Report Prescribed by Law or Regulation

21.               In some cases, law or regulation of the relevant jurisdiction prescribes the layout or wording of the auditor's report in a form or in terms that are significantly different from the requirements of the Australian Auditing Standards.  In these circumstances, the auditor shall evaluate:

(a)                Whether users might misunderstand the assurance obtained from the audit of the financial report and, if so,

(b)                Whether additional explanation in the auditor's report can mitigate possible misunderstanding.[5]

    If the auditor concludes that additional explanation in the auditor's report cannot mitigate possible misunderstanding, the auditor shall not accept the audit engagement, unless required by law or regulation to do so.  An audit conducted in accordance with such law or regulation does not comply with Australian Auditing Standards.  Accordingly, the auditor shall not include any reference within the auditor's report to the audit having been conducted in accordance with Australian Auditing Standards.[6]  (Ref: Para. A38‑A39)

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Application and Other Explanatory Material

Scope of this Auditing Standard (Ref: Para. 1)

A1.             ASQM 1[7] deals with the firm's responsibilities regarding the acceptance and continuance of client relationships and specific engagements. The auditor's responsibilities in respect of relevant ethical requirements, including those related to independence, in the context of the acceptance of an audit engagement and insofar as they are within the control of the auditor are dealt with in ASA 220.[8]  This Auditing Standard deals with those matters (or preconditions) that are within the control of the entity and upon which it is necessary for the auditor and the entity's management to agree.

Preconditions for an Audit

The Financial Reporting Framework (Ref: Para. 6(a))

A2.             A condition for acceptance of an assurance engagement is that the criteria referred to in the definition of an assurance engagement are suitable and available to intended users.[9]  Criteria are the benchmarks used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation and disclosure.  Suitable criteria enable reasonably consistent evaluation or measurement of a subject matter within the context of professional judgement.  For purposes of the Australian Auditing Standards, the applicable financial reporting framework provides the criteria the auditor uses to audit the financial report, including where relevant its fair presentation.

A3.             Without an acceptable financial reporting framework, management does not have an appropriate basis for the preparation of the financial report and the auditor does not have suitable criteria for auditing the financial report.  In many cases, the auditor may presume that the applicable financial reporting framework is acceptable, as described in paragraphs A8‑A9.

Determining the Acceptability of the Financial Reporting Framework

A4.             Factors that are relevant to the auditor's determination of the acceptability