Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p29
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 29/63)
Character Range: 95894–99063

represent a misstatement if, for example, the difference arises from information that was available to management when the previous period's financial report was finalised, or that could reasonably be expected to have been obtained and taken into account in the context of the applicable financial reporting framework.[42] 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 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.

Specialised Skills or Knowledge (Ref: Para. 15)

A61.         Matters that may affect the auditor's determination of whether the engagement team requires specialised skills or knowledge, include, for example:[43]

           * The nature of the accounting estimates for a particular business or industry (for example, mineral deposits, agricultural assets, complex financial instruments, insurance contract liabilities).

           * The degree of estimation uncertainty.

           * The complexity of the method or model used.

           * The complexity of the requirements of the applicable financial reporting framework relevant to accounting estimates, including whether there are areas known to be subject to differing interpretation or practice or areas where there are inconsistencies in how accounting estimates are made.

           * The procedures the auditor intends to undertake in responding to assessed risks of material misstatement.

           * The need for judgement about matters not specified by the applicable financial reporting framework.

           * The degree of judgement needed to select data and assumptions.

           * The complexity and extent of the entity's use of information technology in making accounting estimates.

The nature, timing and extent of the involvement of individuals with specialised skills and knowledge may vary throughout the audit.

A62.         The auditor may not possess the specialised skills or knowledge necessary when the matter involved is in a field other than accounting or auditing (for example, valuation skills) and may need to use an auditor's expert.[44]

A63.         Many accounting estimates do not require the application of specialised skills or knowledge. For example, specialised skills or knowledge may not be needed for a simple inventory obsolescence calculation. However, for example, for expected credit losses of a banking institution or an insurance contract liability for an insurance entity, the auditor is likely to conclude that it is necessary to apply specialised skills or knowledge.

Identifying and Assessing the Risks of Material Misstatement (Ref: Para. 4, 16)

A64.         Identifying and assessing risks of material misstatement at the assertion level relating to