Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p9
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 24375–29210

reasons for any changes thereto; (Ref: Para. A82‒A84) and

(c)                How inherent risk factors affect susceptibility of assertions to misstatement and the degree to which they do so, in the preparation of the financial report in accordance with the applicable financial reporting framework, based on the understanding obtained in (a) and (b).  (Ref: Para. A85‒A89)

20.               The auditor shall evaluate whether the entity's accounting policies are appropriate and consistent with the applicable financial reporting framework.

Understanding the Components of the Entity's System of Internal Control (Ref: Para. A90 – A95)

Control Environment, the Entity's Risk Assessment Process and the Entity's Process to Monitor the System of Internal Control (Ref: Para. A96‒A98)

Control environment
21.               The auditor shall obtain an understanding of the control environment relevant to the preparation of the financial report, through performing risk assessment procedures, by: (Ref: Para. A99–A100)
    (a)                Understanding the set of controls, processes and structures that address: (Ref: Para. A101‒A102)                                                                                               and
                                                                                                                                                                                                                          (b)                Evaluating whether: (Ref: Para. A103‒A108)
         (i)                 How management's oversight responsibilities are carried out, such as the entity's culture and management's commitment to integrity and ethical values;
                                                                                                                                                                                                                               (i)                 Management, with the oversight of those charged with governance, has created and maintained a culture of honesty and ethical behaviour;
         (ii)               When those charged with governance are separate from management, the independence of, and oversight over the entity's system of internal control by, those charged with governance;
                                                                                                                                                                                                                               (ii)               The control environment provides an appropriate foundation for the other components of the entity's system of internal control considering the nature and complexity of the entity; and
         (iii)             The entity's assignment of authority and responsibility;
                                                                                                                                                                                                                               (iii)             Control deficiencies identified in the control environment undermine the other components of the entity's system of internal control.
         (iv)             How the entity attracts, develops, and retains competent individuals; and

         (v)                How the entity holds individuals accountable for their responsibilities in the pursuit of the objectives of the system of internal control;

The entity's risk assessment process
22.               The auditor shall obtain an understanding of the entity's risk assessment process relevant to the preparation of the financial report, through performing risk assessment procedures, by:
    (a)                Understanding the entity's process for: (Ref: Para. A109‒A110)                                                                                                                        and

         (i)                  Identifying business risks relevant to financial reporting objectives; (Ref: Para. A62)

         (ii)               Assessing the significance of those risks, including the likelihood of their occurrence; and
                                                                                                                                                                                                                 (b)                Evaluating whether the entity's risk assessment process is appropriate to the entity's circumstances considering the nature and complexity of the entity.  (Ref: Para. A111‒A113)
         (iii)             Addressing those risks;

23.               If the auditor identifies risks of material misstatement that management failed to identify, the auditor shall:

(a)                Determine whether any such risks are of a kind that the auditor expects would have been