Document ID: chunk:federal_register_of_legislation:F2025C00096:body:0:p45
Version: federal_register_of_legislation:F2025C00096
Segment Type: other
Provision Reference: 
Character Range: 129096–132120

and industries in which they operate. Based on the initial expectations, the group auditor may, and often will, involve component auditors in risk assessment procedures as they may have direct knowledge and experience with the entities or business units that may be helpful in understanding the activities and related risks, and where risks of material misstatement of the group financial report may arise in relation to those entities or business units.

 3.       For identified risks of material misstatement at the assertion level, the group auditor is required to take responsibility for assessing inherent risk.  Such assessment involves assessing the likelihood and magnitude of misstatement, which takes into account how, and the degree to which:[78]

           * Inherent risk factors affect the susceptibility of relevant assertions to misstatement.

           * The risks of material misstatement at the group financial statement level affect the assessment of inherent risk for risks of material misstatement at the assertion level.

 1.       Based on the risk assessment procedures performed, the group auditor may determine that an assessed risk of material misstatement of the group financial report only arises in relation to financial information of certain components.  For example, the risk of material misstatement relating to a legal claim may only exist in entities or business units that operate in a certain jurisdiction or in entities or business units that have similar operations or activities.

 2.       Appendix 3 sets out examples of events and conditions that, individually or together, may indicate risks of material misstatement of the group financial report, whether due to fraud or error, including with respect to the consolidation process.

Fraud

 1.       In applying ASA 240,[79] the auditor is required to identify and assess the risks of material misstatement of the financial report due to fraud, and to design and perform further audit procedures whose nature, timing and extent are responsive to the assessed risks of material misstatement due to fraud at the assertion level.  Information used to identify the risks of material misstatement of the group financial report due to fraud may include the following:

           * Group management's assessment of the risk that the group financial report may be materially misstated due to fraud.

           * Group management's process for identifying and responding to the risks of fraud in the group financial report, including any specific fraud risks identified by group management, or classes of transactions, account balances, or disclosures for which a risk of fraud is higher.

           * Whether there are particular components that are more susceptible to risks of material misstatement due to fraud.

           * Whether any fraud risk factors or indicators of management bias exist in the consolidation process.

           * How those charged with governance of the group monitor group management's processes for