Responding to the Assessed Risks of MateResponding to the Assessed Risks of Material Misstatement

Responding to the Assessed Risks of Material Misstatement

1. In responding to assessed risks in accordance with ASA 330, the user auditor shall:
   1. Determine whether sufficient appropriate audit evidence concerning the relevant financial report assertions is available from records held at the user entity; and, if not,
   2. Perform further audit procedures to obtain sufficient appropriate audit evidence or use another auditor to perform those procedures at the service organisation on the user auditor’s behalf. (Ref: Para. A24‑A28)

Tests of Controls

1. When the user auditor’s risk assessment includes an expectation that controls at the service organisation are operating effectively, the user auditor shall obtain audit evidence about the operating effectiveness of those controls from one or more of the following procedures:
   1. Obtaining a type 2 report, if available;
   2. Performing appropriate tests of controls at the service organisation; or
   3. Using another auditor to perform tests of controls at the service organisation on behalf of the user auditor. (Ref: Para. A29‑A30)

Using a Type 2 Report as Audit Evidence that Controls at the Service Organisation Are Operating Effectively

1. If, in accordance with paragraph 16(a) of this Auditing Standard, the user auditor plans to use a type 2 report as audit evidence that controls at the service organisation are operating effectively, the user auditor shall determine whether the service auditor’s report provides sufficient appropriate audit evidence about the effectiveness of the controls to support the user auditor’s risk assessment by:
   1. Evaluating whether the description, design and operating effectiveness of controls at the service organisation is at a date or for a period that is appropriate for the user auditor’s purposes;
   2. Determining whether complementary user entity controls identified by the service organisation are relevant to the user entity and, if so, obtaining an understanding of whether the user entity has designed and implemented such controls and, if so, testing their operating effectiveness;
   3. Evaluating the adequacy of the time period covered by the tests of controls and the time elapsed since the performance of the tests of controls; and
   4. Evaluating whether the tests of controls performed by the service auditor and the results thereof, as described in the service auditor’s report, are relevant to the assertions in the user entity’s financial report and provide sufficient appropriate audit evidence to support the user auditor’s risk assessment. (Ref: Para. A31‑A39)