Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p5
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 12436–15566

entity and its environment, the applicable financial reporting framework, and the entity's system of internal control are interdependent with concepts within the requirements to identify and assess the risks of material misstatement.  In obtaining the understanding required by this ASA, initial expectations of risks may be developed, which may be further refined as the auditor progresses through the risk identification and assessment process.  In addition, this ASA and ASA 330 require the auditor to revise the risk assessments, and modify further overall responses and further audit procedures, based on audit evidence obtained from performing further audit procedures in accordance with ASA 330, or if new information is obtained.

8.                   ASA 330 requires the auditor to design and implement overall responses to address the assessed risks of material misstatement at the financial report level.[8] ASA 330 further explains that the auditor's assessment of the risks of material misstatement at the financial report level, and the auditor's overall responses, is affected by the auditor's understanding of the control environment.  ASA 330 also requires the auditor to design and perform further audit procedures whose nature, timing and extent are based on and are responsive to the assessed risks of material misstatement at the assertion level.[9]

Scalability

9.                   ASA 200 states that some ASAs include scalability considerations which illustrate the application of the requirements to all entities regardless of whether their nature and circumstances are less complex or more complex.[10] This ASA is intended for audits of all entities, regardless of size or complexity and the application material therefore incorporates specific considerations specific to both less and more complex entities, where appropriate.  While the size of an entity may be an indicator of its complexity, some smaller entities may be complex and some larger entities may be less complex.

Effective Date

10.               [Deleted by the AUASB. Refer to Aus 0.3]

Objective

11.               The objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial report and assertion levels thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement.

Definitions

12.               For the purposes of this Auditing Standard, the following terms have the meanings attributed below:

(a)                Assertions – Representations, explicit or otherwise, with respect to the recognition, measurement, presentation and disclosure of information in the financial report which are inherent in management representing that the financial report is prepared in accordance with the applicable financial reporting framework.  Assertions are used by the auditor to consider the different types of potential misstatements that may occur when identifying, assessing and responding to the risks of material misstatement.  (Ref: Para. A1)

(b)                Business risk – A risk resulting from