Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p48
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 134225–137224

be performed within the entity.

203.           Existing paragraph A21 is amended to read as follows:

As explained in ASA 315,[22] significant risks require special audit consideration are risks assessed close to the upper end of the spectrum of inherent risk and therefore the external auditor's ability to use the work of the internal audit function in relation to significant risks will be restricted to procedures that involve limited judgement.  In addition, where the risks of material misstatement is other than low, the use of the work of the internal audit function alone is unlikely to reduce audit risk to an acceptably low level and eliminate the need for the external auditor to perform some tests directly.

204.           Existing footnote 25 in paragraph A26 is amended to read as follows:

See ASA 315 (as amended), paragraph A116A118.

Amendments to ASA 620

205.           Existing paragraph A4 is amended to read as follows:

An auditor's expert may be needed to assist the auditor in one or more of the following:

           * Obtaining an understanding of the entity and its environment, the applicable financial reporting framework and the, including its entity's system of internal control.

Amendments to ASA 700

206.           Existing footnote 35 in paragraph A47 is amended to read as follows:

See ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, paragraph 412(c).

Amendments to ASA 701

207.           Existing paragraph A20 is amended to read as follows:

ASA 315 defines a significant risk as an identified and assessed risk of material misstatement for which the assessment of inherent risk is close to the upper end of the spectrum of inherent risk due to the degree to which the inherent risk factors affect the combination of the likelihood of a misstatement occurring and the magnitude of the potential misstatement should that misstatement occur that, in the auditor's judgement, requires special audit consideration.[24] Areas of significant management judgement and significant unusual transactions may often be identified as significant risks.  Significant risks are therefore often areas that require significant auditor attention.

208.           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.

209.           Existing footnote 26 in paragraph A22 is amended to read as follows:

See ASA 315, paragraph 3137.

Amendments to ASA 720

210.           Existing paragraph A31 is amended to read as follows:

The auditor's knowledge obtained in the audit includes the auditor's understanding of the entity and its environment, the applicable financial reporting framework, and including the entity's system of internal control, obtained in accordance with ASA 315.[11] ASA 315 sets out the auditor's required understanding, which includes such matters as obtaining