Main changes from AUS 406 (February 2004Main changes from AUS 406 (February 2004) The Auditor's Procedures in Response to Assessed Risks

Main changes from AUS 406 (February 2004) The Auditor's Procedures in Response to Assessed Risks

The main differences between this Auditing Standard and the Auditing Standard issued by the Auditing & Assurance Standards Board of the Australian Accounting Research Foundation, AUS 406 (February 2004) The Auditor's Procedures in Response to Assessed Risks, are that in this Auditing Standard:

1. The word ‘shall’, in the bold-type paragraphs, is the terminology used to describe an auditor’s mandatory requirements, whereas an auditor’s degree of responsibility is described in AUS 406 by the word ‘should’.
2. The explanatory guidance paragraphs provide guidance and illustrative examples to assist the auditor in fulfilling the mandatory requirements, whereas in AUS 406 some obligations are implied within certain explanatory paragraphs. Accordingly, such paragraphs have been redrafted to clarify that the matter forms part of the explanatory guidance.
3. The following implied obligations in AUS 406 have been elevated and re-stated as specific mandatory requirements:

(a) when the auditor plans to perform only substantive procedures, the auditor shall design substantive procedures, for the relevant assertions, that are effective in reducing risks of material misstatement to an acceptably low level (paragraph 14);

(b) if the auditor’s procedures detect a material misstatement that was not identified by the entity and that is indicative of a material weakness in internal control, the auditor shall communicate that weakness to management and those charged with governance on a timely basis (paragraph 44);

(c) when the auditor plans to use audit evidence about the operating effectiveness of controls obtained in a prior audit, the auditor shall perform audit procedures during the current period to establish the continuing relevance of the audit evidence (paragraph 52);

(d) when the approach to significant risks consists only of substantive procedures, the auditor shall perform tests of details only or a combination of tests of details and substantive analytical procedures to address such significant risks (paragraph 73); and

(e) where the auditor plans to use audit evidence from the performance of substantive procedures in a prior audit, the auditor shall perform audit procedures during the current period to establish the continuing relevance of the audit evidence (paragraph 84).

AUTHORITY STATEMENT

The Auditing and Assurance Standards Board (AUASB) makes Auditing Standard ASA 330 The Auditor's Procedures in Response to Assessed Risks as set out in paragraphs 1 to 101, pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001.