Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p38
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 106297–109396

paragraph 13 of this ASA relate more specifically to accounting estimates and build on the broader requirements in ASA 315.

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

The nature, timing, and extent of the auditor's procedures to obtain the understanding of the entity and its environment, including the applicable financial reporting framework, and the entity's system of internal control, related to the entity's accounting estimates, may depend, to a greater or lesser degree, on the extent to which the individual matter(s) apply in the circumstances.  For example, the entity may have few transactions or other events and or conditions that give rise to the need for accounting estimates, the applicable financial reporting requirements may be simple to apply, and there may be no relevant regulatory factors.  Further, the accounting estimates may not require significant judgements, and the process for making the accounting estimates may be less complex.  In these circumstances, the accounting estimates may be subject to, or affected by, estimation uncertainty, complexity, subjectivity, or other inherent risk factors to a lesser degree, and there may be fewer identified controls in the control activities component relevant to the audit.  If so, the auditor's risk identification and assessment procedures are likely to be less extensive and may be obtained primarily through enquiries of management with appropriate responsibilities for the financial report, such as and simple walk-throughs of management's process for making the accounting estimate (including when evaluating whether identified controls in that process are designed effectively and when determining whether the control has been implemented).

152.           Existing title under the section heading The Entity and Its Environment is amended to read as follows:

The entity's transactions and other events and or conditions (Ref: Para. 13(a))

153.           Existing paragraph A24 is amended to read as follows:

Obtaining an understanding of the requirements of the applicable financial reporting framework provides the auditor with a basis for discussion with management and, where applicable, those charged with governance about how management has applied theose requirements of the applicable financial reporting framework relevant to the accounting estimates, and about the auditor's determination of whether they have been applied appropriately.  This understanding also may assist the auditor in communicating with those charged with governance when the auditor considers a significant accounting practice that is acceptable under the applicable financial reporting framework, not to be the most appropriate in the circumstances of the entity.34

154.           Existing section heading after paragraph A27 has been amended to read as The Entity's System of Internal Control Relevant to the Audit

155.           Existing paragraph A28 is amended to read as follows:

In applying ASA 315,[35] the auditor's understanding of the nature and extent of oversight and governance that the