Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p15
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 42095–45436

evidenced by the following:

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    Internal control components are deficient Deficiencies in internal control as a result of the following:

           * Inadequate monitoring of controls process to monitor the entity's system of internal control, including automated controls and controls over interim financial reporting (where external reporting is required).

           * High turnover rates or employment of staff in accounting, information technology, or the internal audit function that are not effective.

           * Accounting and information systems that are not effective, including situations involving significant deficiencies in internal control.

    …

    Attitudes/Rationalisations

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    Risk Factors Relating to Misstatements Arising From Misappropriation of Assets

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    Incentives/Pressures

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    Opportunities

    Certain characteristics or circumstances may increase the susceptibility of assets to misappropriation. For example, opportunities to misappropriate assets increase when there are the following:

    …

    Inadequate internal controls over assets may increase the susceptibility of misappropriation of those assets.  For example, misappropriation of assets may occur because there is the following:

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    Attitudes/Rationalisations

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           * Disregard for internal controls over misappropriation of assets by overriding existing controls or by failing to take appropriate remedial action on known deficiencies in internal control.

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55.               Existing Appendix 2 is amended to read as follows:

    Examples of Possible Audit Procedures to Address the Assessed Risks of Material Misstatement Due to Fraud

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    Consideration at the Assertion Level

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    The following are specific examples of responses:

           * Visiting locations or performing certain tests on a surprise or unannounced basis. For example, observing inventory at locations where auditor attendance has not been previously announced or counting cash at a particular date on a surprise basis.

           * …

           * If the work of an expert becomes particularly significant with respect to a financial statement item for which the assessed risk of material misstatement due to fraud is high, performing additional procedures relating to some or all of the expert's assumptions, methods or findings to determine that the findings are not unreasonable, or engaging another expert for that purpose.

    …

Amendments to ASA 250

56.               Existing footnote 4 in paragraph 13 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 1119.

57.               Existing paragraph A23 is amended to read as follows:

    As required by paragraph 22, the auditor evaluates the implications of identified or suspected non-compliance in relation to other aspects of the audit, including the auditor's risk assessment and the reliability of written representations.  The implications of particular identified or suspected non-compliance will depend on the relationship of the perpetration and concealment, if any, of the act to specific controls activities and the level of management or individuals working for, or under the direction of, the entity