Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p17
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 48041–51115

any other stage of the audit.  This ASA specifies which identified deficiencies the auditor is required to communicate to those charged with governance and management.

63.               Existing paragraph A3 is amended to read as follows:

    While the concepts underlying controls in the control activities component in smaller entities are likely to be similar to those in larger entities, the formality with which they operate will vary.  Further, smaller entities may find that certain types of controls activities are not necessary because of controls applied by management.  For example, management's sole authority for granting credit to customers and approving significant purchases can provide effective control over important account balances and transactions, lessening or removing the need for more detailed controls activities.

64.               Existing paragraph A8 is amended to read as follows:

    Controls may be designed to operate individually or in combination to effectively prevent, or detect and correct, misstatements.[5]  For example, controls over accounts receivable may consist of both automated and manual controls designed to operate together to prevent, or detect and correct, misstatements in the account balance.  A deficiency in internal control on its own may not be sufficiently important to constitute a significant deficiency.  However, a combination of deficiencies affecting the same account balance or disclosure, relevant assertion, or component of the entity's system of internal control may increase the risks of misstatement to such an extent as to give rise to a significant deficiency.

Amendments to ASA 300

65.               Existing footnote 8 in paragraph A4 is amended to read as follows:

ASA 315, paragraph 1017, establishes requirements and provides guidance on the engagement team's discussion of the susceptibility of the entity to material misstatements of the financial report. ASA 240 The Auditor's Responsibilities Relating to Fraud in an Audit of a Financial Report, paragraph 1516, provides guidance on the emphasis given during this discussion to the susceptibility of the entity's financial report to material misstatement due to fraud.

66.               Existing paragraph A21 is amended to read as follows:

    As discussed in paragraph A11, a suitable, brief memorandum may serve as the documented strategy for the audit of a smaller entity.  For the audit plan, standard audit programs or checklists (see paragraph A17) drawn up on the assumption of few relevant controls[11] activities, as is likely to be the case in a smaller entity, may be used provided that they are tailored to the circumstances of the engagement, including the auditor's risk assessments.

Amendments to ASA 320

67.               Existing footnote 3 in paragraph 6 is amended to read as follows:

See ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment, paragraphs A129-A130A191-A192.

68.               Existing footnote 13 in paragraph A2 is amended