Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p78
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 230176–235902

be sold.

                                                                                                                        Human resources competence:

                                                                                                                              * Changes in key personnel including departure of key executives.

                                                                                                                        IT:

                                                                                                                              * Changes in the IT environment.

                                                                                                                              * Installation of significant new IT systems related to financial reporting.

                                                                                                                        Applicable financial reporting framework:

                                                                                                                              * Application of new accounting pronouncements.

                                                                                                                        Capital:

                                                                                                                              * New constraints on the availability of capital and credit.

                                                                                                                        Regulatory:

                                                                                                                              * Inception of investigations into the entity's operations or financial results by regulatory or government bodies.

                                                                                                                              * Impact of new legislation related to environmental protection.
Uncertainty                                                                                                             Reporting:

                                                                                                                              * Events or transactions that involve significant measurement uncertainty, including accounting estimates, and related disclosures.

                                                                                                                              * Pending litigation and contingent liabilities, for example, sales warranties, financial guarantees and environmental remediation.
Susceptibility to misstatement due to management bias or other fraud risk factors insofar as they affect inherent risk  Reporting:

                                                                                                                              * Opportunities for management and employees to engage in fraudulent financial reporting, including omission, or obscuring, of significant information in disclosures.

                                                                                                                        Transactions:

                                                                                                                              * Significant transactions with related parties.

                                                                                                                              * Significant amount of non-routine or non-systematic transactions including intercompany transactions and large revenue transactions at period end.

                                                                                                                              * Transactions that are recorded based on management's intent, for example, debt refinancing, assets to be sold and classification of marketable securities.

Other events or conditions that may indicate risks of material misstatement at the financial report level:

      * Lack of personnel with appropriate accounting and financial reporting skills.

      * Control deficiencies – particularly in the control environment, risk assessment process and process for monitoring, and especially those not addressed by management.

      * Past misstatements, history of errors or a significant amount of adjustments at period end.

Appendix 3

(Ref: Para. 12(m), 21–26, A90–A181)

Understanding the Entity's System of Internal Control

      1. The entity's system of internal control may be reflected in policy and procedures manuals, systems and forms, and the information embedded therein, and is effected by people.  The entity's system of internal control is implemented by management, those charged with governance, and other personnel based on the structure of the entity.  The entity's system of internal control can be applied, based on the decisions of management, those charged with governance or other personnel and in the context of legal or regulatory requirements, to the operating model of the entity, the legal entity structure, or a combination of these.

2.                   This appendix further explains the components of, as well as the limitations of, the entity's system of internal control as set out in paragraphs 12(m), 21–26, and A90–A181, as they relate to a financial report audit.

3.                   Included within the entity's system of internal control are aspects that relate to the entity's reporting objectives, including its financial reporting objectives, but it may also include aspects that relate to its operations or compliance