Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p35
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 97743–100846

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 planned reliance on the operating effectiveness of controls.  If the auditor does not perform plan to tests the operating effectiveness of controls, or does not intend to rely on the operating effectiveness of controls, the auditor's assessment of the risk of material misstatement at the assertion level control risk cannot be reduced for the effective operation of controls with respect to the particular assertion is such that the assessment of the risk of material misstatement is the same as the assessment of inherent risk.6 (Ref: Para. A10)

141.           Existing paragraph 8 is amended to read as follows:

The exercise of professional scepticism in relation to accounting estimates is affected by the auditor's consideration of inherent risk factors, and its importance increases when accounting estimates are subject to a greater degree of estimation uncertainty or are affected to a greater degree by complexity, subjectivity or other inherent risk factors.  Similarly, the exercise of professional scepticism is important when there is greater susceptibility to misstatement due to management bias or fraud other fraud risk factors insofar as they affect inherent risk.  (Ref: Para. A11)

142.           Existing paragraph 13 is amended to read as follows:

When obtaining an understanding of the entity and its environment, the applicable financial reporting framework and including the entity's system of internal control, as required by ASA 315,[8] the auditor shall obtain an understanding of the following matters related to the entity's accounting estimates.  The auditor's procedures to obtain the understanding shall be performed to the extent necessary to obtain audit evidence that provides an appropriate basis for the identification and assessment of risks of material misstatement at the financial statement and assertion levels.  (Ref: Para. A19–A22)

    Obtaining an Understanding of tThe Entity and Its Environment and the Applicable Financial Reporting Framework

(a)                The entity's transactions and other events orand conditions that may give rise to the need for, or changes in, accounting estimates to be recognised or disclosed in the financial report.  (Ref: Para. A23)

(b)                The requirements of the applicable financial reporting framework related to accounting estimates (including the recognition criteria, measurement bases, and the related presentation and disclosure requirements); and how they apply in the context of the nature and circumstances of the entity and its environment, including how transactions and other events or conditions are subject to, or affected by, the inherent risk factors affect susceptibility to misstatement of assertions.  (Ref: Para. A24–A25)

    …

    Obtaining an Understanding of tThe Entity's System of Internal Control