Document ID: chunk:federal_register_of_legislation:F2016C00028:reg:26:p29
Version: federal_register_of_legislation:F2016C00028
Segment Type: reg
Provision Reference: reg 26 (pt 29/47)
Character Range: 91416–94616

recognised or disclosed in the financial report that has been obtained from an entity's tax returns and records.

           * Information disclosed in the financial report that has been obtained from analyses prepared to support management's assessment of the entity's ability to continue as a going concern, such as disclosures, if any, related to events or conditions that have been identified that may cast significant doubt on the entity's ability to continue as a going concern. [15]

A92.         The understanding of the information system relevant to financial reporting required by paragraph 18 of this Auditing Standard (including the understanding of relevant aspects of that system relating to information disclosed in the financial report that is obtained from within or outside of the general and subsidiary ledgers) is a matter of the auditor's professional judgement.  For example, certain amounts or disclosures in the entity's financial report (such as disclosures about credit risk, liquidity risk, and market risk) may be based on information obtained from the entity's risk management system.  However, the auditor is not required to understand all aspects of the risk management system, and uses professional judgement in determining the necessary understanding.

Journal entries

A93.         An entity's information system typically includes the use of standard journal entries that are required on a recurring basis to record transactions.  Examples might be journal entries to record sales, purchases, and cash disbursements in the general ledger, or to record accounting estimates that are periodically made by management, such as changes in the estimate of uncollectible accounts receivable.

A94.         An entity's financial reporting process also includes the use of non‑standard journal entries to record non‑recurring, unusual transactions or adjustments.  Examples of such entries include consolidating adjustments and entries for a business combination or disposal or non‑recurring estimates such as the impairment of an asset.  In manual general ledger systems, non‑standard journal entries may be identified through inspection of ledgers, journals, and supporting documentation.  When automated procedures are used to maintain the general ledger and prepare a financial report, such entries may exist only in electronic form and may therefore be more easily identified through the use of computer‑assisted audit techniques.

Related business processes

A95.         An entity's business processes are the activities designed to:

           * Develop, purchase, produce, sell and distribute an entity's products and services;

           * Ensure compliance with laws and regulations; and

           * Record information, including accounting and financial reporting information.

    Business processes result in the transactions that are recorded, processed and reported by the information system.  Obtaining an understanding of the entity's business processes, which include how transactions are originated, assists the auditor obtain an understanding of the entity's information system relevant to financial reporting in a manner that is appropriate to the