Document ID: chunk:federal_register_of_legislation:F2022C01152:reg:4:p14
Version: federal_register_of_legislation:F2022C01152
Segment Type: reg
Provision Reference: reg 4 (pt 14/63)
Character Range: 52264–55463

transactions, account balance or disclosures, before consideration of controls.[32] Appendix 1 further explains the nature of these inherent risk factors, and their inter‑relationships, in the context of making accounting estimates and their presentation in the financial report.

A9.             When assessing the risks of material misstatement at the assertion level[33], in addition to estimation uncertainty, complexity, and subjectivity, the auditor also takes into account the degree to which inherent risk factors included in ASA 315, (other than estimation uncertainty, complexity, and subjectivity), affect susceptibility to misstatement of assertions to misstatement about the accounting estimate. Such additional inherent risk factors include:

           * Change in the nature or circumstances of the relevant financial statement items, or requirements of the applicable financial reporting framework which may give rise to the need for changes in the method, assumptions or data used to make the accounting estimate.

           * Susceptibility to misstatement due to management bias, or other fraud risk factors insofar as they affect inherent risk, in making the accounting estimate.

           * Uncertainty, other than estimation uncertainty.

Control Risk (Ref: Para. 6)

A10.         In assessing control risk at the assertion level in accordance with ASA 315, the auditor takes into account whether the auditor plans to test the operating effectiveness of controls. When the auditor is considering whether to test the operating effectiveness of controls, the auditor's evaluation that controls are effectively designed and have been implemented supports an expectation, by the auditor, about the operating effectiveness of the controls in establishing the plan to test them.

Professional Scepticism (Ref: Para. 8)

A11.         Paragraphs A60, A95, A96, A137 and A139 are examples of paragraphs that describe ways in which the auditor can exercise professional scepticism. Paragraph A152 provides guidance on ways in which the auditor's exercise of professional scepticism may be documented, and includes examples of specific paragraphs in this Auditing Standard for which documentation may provide evidence of the exercise of professional scepticism.

Concept of "Reasonable" (Ref: Para. 9, 35)

A12.         Other considerations that may be relevant to the auditor's consideration of whether the accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework include whether:

           * The data and assumptions used in making the accounting estimate are consistent with each other and with those used in other accounting estimates or areas of the entity's business activities; and

           * The accounting estimate takes into account appropriate information as required by the applicable financial reporting framework.

A13.         The term "applied appropriately" as used in paragraph 9 means in a manner that not only complies with the requirements of the applicable financial reporting framework but, in doing so, reflects judgements that are consistent with the objective of the measurement basis in