Document ID: chunk:federal_register_of_legislation:F2023C01138:reg:4:p14
Version: federal_register_of_legislation:F2023C01138
Segment Type: reg
Provision Reference: reg 4 (pt 14/43)
Character Range: 43712–46774

understanding of the entity and its environment, the applicable financial reporting framework, and the entity's system of internal control, obtained in accordance with ASA 315.[12]  ASA 315 sets out the auditor's required understanding, which includes such matters as obtaining an understanding of:

(a)                The entity's organisational structure, ownership and governance, and its business model, including the extent to which the business model integrates the use of IT;

(b)                Relevant industry, regulatory, and other external factors;

(c)                The relevant measures used, internally and externally, to assess the entity's financial performance.

A32.         The auditor's knowledge obtained in the audit may also include matters that are prospective in nature.  Such matters may include, for example, business prospects and future cash flows that the auditor considered when evaluating the assumptions used by management in performing impairment tests on intangible assets such as goodwill, or when evaluating management's assessment of the entity's ability to continue as a going concern.

A33.         In considering whether there is a material inconsistency between the other information and the auditor's knowledge obtained in the audit, the auditor may focus on those matters in the other information that are of sufficient importance that a misstatement of the other information in relation to that matter could be material.

A34.         In relation to many matters in the other information, the auditor's recollection of the audit evidence obtained and conclusions reached in the audit may be sufficient to enable the auditor to consider whether there is a material inconsistency between the other information and the auditor's knowledge obtained in the audit.  The more experienced and the more familiar with the key aspects of the audit the auditor is, the more likely it is that the auditor's recollection of relevant matters will be sufficient.  For example, the auditor may be able to consider whether there is a material inconsistency between the other information and the auditor's knowledge obtained in the audit in light of the auditor's recollection of discussions held with management or those charged with governance or findings from procedures carried out during the audit such as the reading of board minutes, without the need to take further action.

A35.         The auditor may determine that referring to relevant audit documentation or making enquiries of relevant members of the engagement team, including relevant component auditors, is appropriate as a basis for the auditor's consideration of whether a material inconsistency exists.  For example:

           * When the other information describes the planned cessation of a major product line and, although the auditor is aware of the planned cessation, the auditor may make enquiries of the relevant engagement team member who performed the audit procedures in this area to support the auditor's consideration of whether the description is