Document ID: chunk:federal_register_of_legislation:F2023C01136:reg:9:p12
Version: federal_register_of_legislation:F2023C01136
Segment Type: reg
Provision Reference: reg 9 (pt 12/24)
Character Range: 36930–40059

in the Financial Report that Involved Significant Management Judgement, Including Accounting Estimates that Are Subject to a High Degree of Estimation Uncertainty (Ref: Para. 9(b))

A23.         ASA 260 requires the auditor to communicate with those charged with governance the auditor's views about significant qualitative aspects of the entity's accounting practices, including accounting policies, accounting estimates and financial statement disclosures.[28]  In many cases, this relates to critical accounting estimates and related disclosures, which are likely to be areas of significant auditor attention, and also may be identified as significant risks.

A24.         However, users of the financial report have highlighted their interest in accounting estimates that are subject to a high degree of estimation uncertainty (see ASA 540[29]) that may have not been determined to be significant risks.  Among other things, such estimates are highly dependent on management judgement and are often the most complex areas of the financial report, and may require the involvement of both a management's expert and an auditor's expert.  Users have also highlighted that accounting policies that have a significant effect on the financial report (and significant changes to those policies) are relevant to their understanding of the financial report, especially in circumstances where an entity's practices are not consistent with others in its industry.

The Effect on the Audit of Significant Events or Transactions that Occurred during the Period (Ref: Para. 9(c))

A25.         Events or transactions that had a significant effect on the financial report or the audit may be areas of significant auditor attention and may be identified as significant risks.  For example, the auditor may have had extensive discussions with management and those charged with governance at various stages throughout the audit about the effect on the financial report of significant transactions with related parties or significant transactions that are outside the normal course of business for the entity or that otherwise appear to be unusual.[30]  Management may have made difficult or complex judgements in relation to recognition, measurement, presentation or disclosure of such transactions, which may have had a significant effect on the auditor's overall strategy.

A26.         Significant economic, accounting, regulatory, industry, or other developments that affected management's assumptions or judgements may also affect the auditor's overall approach to the audit and result in a matter requiring significant auditor attention.

Matters of Most Significance (Ref: Para. 10)

A27.         Matters that required significant auditor attention also may have resulted in significant interaction with those charged with governance.  The nature and extent of communication about such matters with those charged with governance often provides an indication of which matters are of most significance in the audit.  For example, the auditor may have had more in‑depth, frequent or robust interactions with those charged with governance on