Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p13
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 36451–39528

that may be faced by auditors, they are only examples and other risk factors may exist.

49.               Existing footnote 19 in paragraph A32 is amended to read as follows:

See ASA 315, paragraph A48A75.

50.               Existing paragraph A33 is amended to read as follows:

    It is therefore important for the auditor to obtain an understanding of the controls that management has designed, implemented and maintained to prevent and detect fraud.  In doing so, In identifying the controls that address the risks of material misstatement due to fraud, the auditor may learn, for example, that management has consciously chosen to accept the risks associated with a lack of segregation of duties.  Information from obtaining this understanding identifying these controls, and evaluating their design and determining whether they have been implemented, may also be useful in identifying fraud risks factors that may affect the auditor's assessment of the risks that the financial report may contain material misstatement due to fraud.

51.               The following footnote 23, is inserted to paragraph A43 of this Auditing Standard, following the wording "Further, the auditor's consideration of the risks of material misstatement associated with inappropriate override of controls over journal entries".

    See ASA 315, paragraph 26(a)(ii)

52.               As a result of the footnote insertion above, subsequent footnotes of this Auditing Standard are re-numbered and references to these footnotes are updated accordingly.

53.               Existing paragraph A44 is amended to read as follows:

    When identifying and selecting journal entries and other adjustments for testing and determining the appropriate method of examining the underlying support for the items selected, the following matters are of relevance:

           * The identification and assessment of the risks of material misstatement due to fraud – the presence of fraud risk factors and other information obtained during the auditor's identification and assessment of the risks of material misstatement due to fraud may assist the auditor to identify specific classes of journal entries and other adjustments for testing.

…

           * The entity's financial reporting process and the nature of evidence that can be obtained – for many entities routine processing of transactions involves a combination of manual and automated steps and procedures controls.  Similarly, the processing of journal entries and other adjustments may involve both manual and automated procedures and controls.  Where information technology is used in the financial reporting process, journal entries and other adjustments may exist only in electronic form.

…

           * Journal entries or other adjustments processed outside the normal course of business – non standard journal entries may not be subject to the same level of internal nature and extent of controls as those journal entries used on a recurring basis to record transactions such as monthly sales, purchases and cash disbursements.

54.