Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p27
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 27/63)
Character Range: 90201–93378

When using external information sources, risks related to processing or recording the data;

           * Whether management has controls around access, change and maintenance of individual models to maintain a strong audit trail of the accredited versions of models and to prevent unauthorised access or amendments to those models; and

           * Whether there are appropriate controls over the transfer of information relating to accounting estimates into the general ledger, including appropriate controls over journal entries.

A53.         In some industries, such as banking or insurance, the term governance may be used to describe activities within the control environment, the entity's process to monitor the system of internal control, and other components of the system of internal control, as described in ASA 315.[40]

A54.         For entities with an internal audit function, its work may be particularly helpful to the auditor in obtaining an understanding of:

           * The nature and extent of management's use of accounting estimates;

           * The design and implementation of controls that address the risks related to the data, assumptions and models used to make the accounting estimates;

           * The aspects of the entity's information system that generate the data on which the accounting estimates are based; and

           * How new risks relating to accounting estimates are identified, assessed and managed.

Reviewing the Outcome or Re‑Estimation of Previous Accounting Estimates (Ref: Para. 14)

A55.         A review of the outcome or re‑estimation of previous accounting estimates (retrospective review) assists in identifying and assessing the risks of material misstatement when previous accounting estimates have an outcome through transfer or realisation of the asset or liability in the current period, or are re‑estimated for the purpose of the current period. Through performing a retrospective review, the auditor may obtain:

           * Information regarding the effectiveness of management's previous estimation process, from which the auditor can obtain audit evidence about the likely effectiveness of management's current process

           * Audit evidence of matters, such as the reasons for changes that may be required to be disclosed in the financial report.

           * Information regarding the complexity or estimation uncertainty pertaining to the accounting estimates.

           * Information regarding the susceptibility of accounting estimates to, or that may be an indicator of, possible management bias. The auditor's professional scepticism assists in identifying such circumstances or conditions and in determining the nature, timing and extent of further audit procedures.

A56.         A retrospective review may provide audit evidence that supports the identification and assessment of the risks of material misstatement in the current period. Such a retrospective review may be performed for accounting estimates made for the prior period's financial report, or may be performed over several periods or a shorter period (such as half‑yearly or quarterly). In some cases, a retrospective