Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p22
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 62227–65219

assertions than others.  For example, in relation to revenue, tests of controls may be most responsive to the assessed risk of material misstatement of the completeness assertion, whereas substantive procedures may be most responsive to the assessed risk of material misstatement of the occurrence assertion.

84.               As a result of the footnote insertion above, subsequent footnotes of this Auditing Standard are re-numbered and references to these footnotes are updated accordingly.

85.               Existing paragraph A10 is amended to read as follows:

The reasons for the assessment given to a risk are relevant in determining the nature of audit procedures.  For example, if an assessed risk is lower because of the particular characteristics of a class of transactions without consideration of the related controls, then the auditor may determine that substantive analytical procedures alone provide sufficient appropriate audit evidence.  On the other hand, if the assessed risk is lower because of internal the auditor plans to test the operating effectiveness of controls, and the auditor intends to base the substantive procedures on that low assessment, then the auditor performs tests of those controls, as required by paragraph 8(a).  This may be the case, for example, for a class of transactions of reasonably uniform, non-complex characteristics that are routinely processed and controlled by the entity's information system.

86.               Existing paragraph A18 is amended to read as follows:

In the case of very small entities, there may not be many controls activities that could be identified by the auditor, or the extent to which their existence or operation have been documented by the entity may be limited.  In such cases, it may be more efficient for the auditor to perform further audit procedures that are primarily substantive procedures.  In some rare cases, however, the absence of controls activities or of other components of the system of internal control may make it impossible to obtain sufficient appropriate audit evidence.

87.               Existing paragraph A20 is amended to read as follows:

Tests of controls are performed only on those controls that the auditor has determined are suitably designed to prevent, or detect and correct, a material misstatement in an relevant assertion, and the auditor plans to test those controls.  If substantially different controls were used at different times during the period under audit, each is considered separately.

88.               Existing paragraph A24 is amended to read as follows:

In some cases, the auditor may find it impossible to design effective substantive procedures that by themselves provide sufficient appropriate audit evidence at the assertion level.[4] This may occur when an entity conducts its business using IT and no documentation of transactions is produced or maintained, other than through the IT system.  In such cases, paragraph 8(b) requires the auditor