Document ID: chunk:federal_register_of_legislation:F2017C00907:reg:15:p11
Version: federal_register_of_legislation:F2017C00907
Segment Type: reg
Provision Reference: reg 15 (pt 11/12)
Character Range: 38027–41301

auditor would otherwise communicate in their governance capacity.[18]

A27.         Where there is a large number of individual immaterial uncorrected misstatements, the auditor may communicate the number and overall monetary effect of the uncorrected misstatements, rather than the details of each individual uncorrected misstatement.

A28.         ASA 260 requires the auditor to communicate with those charged with governance the written representations the auditor is requesting (see paragraph 14).[19]  The auditor may discuss with those charged with governance the reasons for, and the implications of, a failure to correct misstatements, having regard to the size and nature of the misstatement judged in the surrounding circumstances, and possible implications in relation to a future financial report.

    Written Representation (Ref: Para. 14)

A29.         Because the preparation of the financial report requires management and, where appropriate, those charged with governance to adjust the financial report to correct material misstatements, the auditor is required to request them to provide a written representation about uncorrected misstatements.[*]  In some circumstances, management and, where appropriate, those charged with governance may not believe that certain uncorrected misstatements are misstatements.  For that reason, they may want to add to their written representation words such as: "We do not agree that items … and … constitute misstatements because [description of reasons]."  Obtaining this representation does not, however, relieve the auditor of the need to form a conclusion on the effect of uncorrected misstatements.

    Documentation (Ref: Para. 15)

A30.         The auditor's documentation of uncorrected misstatements may take into account:

(a)                The consideration of the aggregate effect of uncorrected misstatements;

(b)                The evaluation of whether the materiality level or levels for particular classes of transactions, account balances or disclosures, if any, have been exceeded; and

(c)                The evaluation of the effect of uncorrected misstatements on key ratios or trends, and compliance with legal, regulatory and contractual requirements (for example, debt covenants).
[1]  See ASA 700 Forming an Opinion and Reporting on a Financial Report, paragraphs 10‑11.
[2]  See ASA 320 Materiality in Planning and Performing an Audit.
  [3]  See ASA 260 Communication with Those Charged with Governance, paragraph 7.
  [4]  See footnote 3.
  [5]  See ASA 230 Audit Documentation, paragraphs 8‑11 and paragraph A6.
  [6]  For example, AASB 7 Financial Instruments: Disclosures, paragraph 42H states that "an entity shall disclose any additional information that it considers necessary to meet the disclosure objectives in paragraph…"
   [7]  For example, Australian Accounting Standards require an entity to provide additional disclosures when compliance with the specific requirements in Australian Accounting Standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance (See AASB 101 Presentation of Financial Statements, paragraph 17(c)).
  [8]  See ASA 240 The