Document ID: chunk:federal_register_of_legislation:F2021C01250:reg:27:p3
Version: federal_register_of_legislation:F2021C01250
Segment Type: reg
Provision Reference: reg 27 (pt 3/23)
Character Range: 15481–18711

material misstatement at the assertion level for each significant class of transactions, account balance, and disclosure, including:

(i)                 The likelihood and magnitude of misstatement due to the particular characteristics of the significant class of transactions, account balance, or disclosure (that is, the inherent risk); and

(ii)               Whether the risk assessment takes account of controls that address the risk of material misstatement (that is, the control risk), thereby requiring the auditor to obtain audit evidence to determine whether the controls are operating effectively (that is, the auditor plans to test the operating effectiveness of controls in determining the nature, timing and extent of substantive procedures); and (Ref: Para. A9-A18)

(b)                Obtain more persuasive audit evidence the higher the auditor's assessment of risk.
(Ref: Para. A19)

Tests of Controls

8.                   The auditor shall design and perform tests of controls to obtain sufficient appropriate audit evidence as to the operating effectiveness of controls if:

(a)                The auditor's assessment of risks of material misstatement at the assertion level includes an expectation that the controls are operating effectively (that is, the auditor plans to test the operating effectiveness of controls in determining the nature, timing and extent of substantive procedures); or

(b)                Substantive procedures alone cannot provide sufficient appropriate audit evidence at the assertion level. (Ref: Para. A20-A24)

9.                   In designing and performing tests of controls, the auditor shall obtain more persuasive audit evidence the greater the reliance the auditor places on the effectiveness of a control.
(Ref: Para. A25)

Nature and Extent of Tests of Controls

10.               In designing and performing tests of controls, the auditor shall:

(a)                Perform other audit procedures in combination with enquiry to obtain audit evidence about the operating effectiveness of the controls, including:

(i)                 How the controls were applied at relevant times during the period under audit;

(ii)               The consistency with which they were applied; and

(iii)             By whom or by what means they were applied.  (Ref: Para. A26-A30)

(b)                To the extent not already addressed, determine whether the controls to be tested depend upon other controls (indirect controls), and if so, whether it is necessary to obtain audit evidence supporting the effective operation of those indirect controls. (Ref: Para. A32-A33)

Timing of Tests of Controls

11.               The auditor shall test controls for the particular time, or throughout the period, for which the auditor intends to rely on those controls, subject to paragraphs 12 and 15 of this Auditing Standard, in order to provide an appropriate basis for the auditor's intended reliance.
(Ref: Para. A33)

Using audit evidence obtained during an interim period

12.               If the auditor obtains audit evidence about the operating effectiveness of controls during an interim period, the auditor shall:

(a)                Obtain audit evidence about significant