Document ID: chunk:federal_register_of_legislation:F2023C01125:body:0:p12
Version: federal_register_of_legislation:F2023C01125
Segment Type: other
Provision Reference: 
Character Range: 33128–36219

(Ref: Para. 13)

A11.         To obtain a general understanding of the legal and regulatory framework, and how the entity complies with that framework, the auditor may, for example:

           * Use the auditor's existing understanding of the entity's industry, regulatory and other external factors;

           * Update the understanding of those laws and regulations that directly determine the reported amounts and disclosures in the financial report;

           * Enquire of management as to other laws or regulations that may be expected to have a fundamental effect on the operations of the entity;

           * Enquire of management concerning the entity's policies and procedures regarding compliance with laws and regulations; and

           * Enquire of management regarding the policies or procedures adopted for identifying, evaluating and accounting for litigation claims.

Laws and Regulations Generally Recognised to Have a Direct Effect on the Determination of Material Amounts and Disclosures in the Financial Report (Ref: Para. 6, 14)

A12.         Certain laws and regulations are well‑established, known to the entity and within the entity's industry or sector, and relevant to the entity's financial report (as described in paragraph 6(a)).  They could include those that relate to, for example:

           * The form and content of a financial report;

           * Industry‑specific financial reporting issues;

           * Accounting for transactions under government contracts; or

           * The accrual or recognition of expenses for income tax or superannuation costs.

    Some provisions in those laws and regulations may be directly relevant to specific assertions in the financial report (e.g., the completeness of income tax provisions), while others may be directly relevant to the financial report as a whole (e.g., the required statements constituting a complete set of financial statements).  The aim of the requirement in paragraph 14 is for the auditor to obtain sufficient appropriate audit evidence regarding the determination of amounts and disclosures in the financial report in compliance with the relevant provisions of those laws and regulations.

    Non‑compliance with other provisions of such laws and regulations and other laws and regulations may result in fines, litigation or other consequences for the entity, the costs of which may need to be provided for in the financial report, but are not considered to have a direct effect on the financial report as described in paragraph 6(a).

Procedures to Identify Instances of Non‑Compliance—Other Laws and Regulations (Ref: Para. 6, 15)

A13.         Certain other laws and regulations may need particular attention by the auditor because they have a fundamental effect on the operations of the entity (as described in paragraph 6(b)).  Non‑compliance with laws and regulations that have a fundamental effect on the operations of the entity may cause the entity to cease operations, or call into question the entity's continuance as a going concern.[12] For example, non‑compliance