Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p42
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 117546–120578

as follows:

A difference between the outcome of an accounting estimate and the amount recognised in the previous period's financial report does not necessarily represent a misstatement of the previous period's financial report.  However, such a difference may represent a misstatement if, for example, the difference arises from information that was available to management when the previous period's financial report were finalised, or that could reasonably be expected to have been obtained and taken into account in the context of the applicable financial reporting framework.38 Such a difference may call into question management's process for taking information into account in making the accounting estimate.  As a result, the auditor may reassess any plan to test related controls and the related assessment of control risk and or may determine that more persuasive audit evidence needs to be obtained about the matter.  Many financial reporting frameworks contain guidance on distinguishing between changes in accounting estimates that constitute misstatements and changes that do not, and the accounting treatment required to be followed in each case.

169.           Existing paragraph A65 is amended to read as follows:

Paragraph A42 of ASA 200 states that the ASAs do not ordinarily refer to inherent risk and control risk separately typically refer to the "risks of material misstatement" rather than to inherent risk and control risk separately.  However, this ASA 315 Auditing Standard requires a separate assessment of inherent risk and control risk to provide a basis for designing and performing further audit procedures to respond to the risks of material misstatement at the assertion level,[45] including significant risks, at the assertion level for accounting estimates in accordance with ASA 330.46

170.           Existing paragraph A66 is amended to read as follows:

In identifying the risks of material misstatement and in assessing inherent risk for accounting estimates in accordance with ASA 315,[47] the auditor is required to take into account the degree to which the accounting estimate is subject to, or affected by, the inherent risk factors that affect susceptibility to misstatement of assertions, and how they do so estimation uncertainty, complexity, subjectivity, or other inherent risk factors.  The auditor's consideration of the inherent risk factors may also provide information to be used in determining:

           * Assessing the likelihood and magnitude of misstatement (i.e., Wwhere inherent risk is assessed on the spectrum of inherent risk); and

           * Determining Tthe reasons for the assessment given to the risks of material misstatement at the assertion level, and that the auditor's further audit procedures in accordance with paragraph 18 are responsive to those reasons.

171.           Existing paragraph A68 is amended to read as follows:

The relevance and significance of inherent risk factors may vary from one estimate to another.  Accordingly, the inherent