Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p41
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 114730–117818

of data.

164.           Existing paragraph A52 is amended to read as follows:

When management makes extensive use of information technology in making an accounting estimate, identified controls relevant to the audit in the control activities component are likely to include general IT controls and application information processing controls.  Such controls may address risks related to:

           * Whether the IT applications or other aspects of the IT environment information technology system has the capability and is appropriately configured to process large volumes of data;

           * Complex calculations in applying a method.  When diverse IT applications systems are required to process complex transactions, regular reconciliations between the IT applications systems are made, in particular when the IT applications systems do not have automated interfaces or may be subject to manual intervention;

…

165.           Existing paragraph A53 is amended to read as follows:

In some industries, such as banking or insurance, the term governance may be used to describe activities within the control environment, the entity's process to monitor the system of internal control monitoring of controls, and other components of the system of internal control, as described in ASA 315.[40]

166.           Existing paragraph A54 is amended to read as follows:

For entities with an internal audit function, its work may be particularly helpful to the auditor in obtaining an understanding of:

…

           * The design and implementation of controls activities that address the risks related to the data, assumptions and models used to make the accounting estimates;

…

167.           Existing paragraph A59 is amended to read as follows:

The measurement objective for fair value accounting estimates and other accounting estimates, based on current conditions at the measurement date, deals with perceptions about value at a point in time, which may change significantly and rapidly as the environment in which the entity operates changes.  The auditor may therefore focus the review on obtaining information that may be relevant to identifying and assessing risks of material misstatement.  For example, in some cases, obtaining an understanding of changes in marketplace participant assumptions that affected the outcome of a previous period's fair value accounting estimates may be unlikely to provide relevant audit evidence.  In this case, audit evidence may be obtained by understanding the outcomes of assumptions (such as a cash flow projections) and understanding the effectiveness of management's prior estimation process that supports the identification and assessment of the risks of material misstatement in the current period.

168.           Existing paragraph A60 is amended to read as follows:

A difference between the outcome of an accounting estimate and the amount recognised in the previous period's financial report does not necessarily represent a misstatement of the previous period's financial report.  However, such a difference may represent a