Document ID: chunk:federal_register_of_legislation:F2023C01130:body:0:p65
Version: federal_register_of_legislation:F2023C01130
Segment Type: other
Provision Reference: 
Character Range: 189631–192755

of material misstatement relate more pervasively to the financial report as a whole and potentially affect many assertions, in which case the auditor may update the identification of risks of material misstatement at the financial report level.

A216.      In circumstances in which risks of material misstatement are identified as financial report level risks due to their pervasive effect on a number of assertions, and are identifiable with specific assertions, the auditor is required to take into account those risks when assessing inherent risk for risks of material misstatement at the assertion level.

Considerations Specific to Public Sector Entities

A217.      In exercising professional judgement as to the assessment of the risk of material misstatement, public sector auditors may consider the complexity of the regulations and directives, and the risks of non-compliance with authorities.

Significant Risks (Ref: Para. 32)

Why significant risks are determined and the implications for the audit

A218.      The determination of significant risks allows for the auditor to focus more attention on those risks that are on the upper end of the spectrum of inherent risk, through the performance of certain required responses, including:

           * Controls that address significant risks are required to be identified in accordance with paragraph 26(a)(i), with a requirement to evaluate whether the control has been designed effectively and implemented in accordance with paragraph 26(d).

           * ASA 330 requires controls that address significant risks to be tested in the current period (when the auditor intends to rely on the operating effectiveness of such controls) and substantive procedures to be planned and performed that are specifically responsive to the identified significant risk.[52]

           * ASA 330 requires the auditor to obtain more persuasive audit evidence the higher the auditor's assessment of risk.[53]

           * ASA 260 requires communicating with those charged with governance about the significant risks identified by the auditor.[54]

           * ASA 701 requires the auditor to take into account significant risks when determining those matters that required significant auditor attention, which are matters that may be key audit matters.[55]

           * Timely review of audit documentation by the engagement partner at the appropriate stages during the audit allows significant matters, including significant risks, to be resolved on a timely basis to the engagement partner's satisfaction on or before the date of the auditor's report.[56]

           * ASA 600 requires the group auditor to evaluate the appropriateness of the design and performance of further audit procedures for areas of higher assessed risks of material misstatement of the group financial report, or significant risks, on which a component auditor is determining the further audit procedures to be performed.[57]

Determining significant risks

A219.      In determining significant risks, the auditor may first identify those assessed risks of material misstatement that have been