Further Substantive Procedures to ResponFurther Substantive Procedures to Respond to Significant Risks

Further Substantive Procedures to Respond to Significant Risks

Estimation Uncertainty

1. For accounting estimates that give rise to significant risks, in addition to other substantive procedures performed to meet the requirements of ASA 330,[7] the auditor shall evaluate the following: (Ref: Para. A102)
   1. How management has considered alternative assumptions or outcomes, and why it has rejected them, or how management has otherwise addressed estimation uncertainty in making the accounting estimate. (Ref: Para. A103‑A106)
   2. Whether the significant assumptions used by management are reasonable. (Ref: Para. A107‑A109)
   3. Where relevant to the reasonableness of the significant assumptions used by management or the appropriate application of the applicable financial reporting framework, management’s intent to carry out specific courses of action and its ability to do so. (Ref: Para. A110)
2. If, in the auditor’s judgement, management has not adequately addressed the effects of estimation uncertainty on the accounting estimates that give rise to significant risks, the auditor shall, if considered necessary, develop a range with which to evaluate the reasonableness of the accounting estimate. (Ref: Para. A111‑A112)

Recognition and Measurement Criteria

1. For accounting estimates that give rise to significant risks, the auditor shall obtain sufficient appropriate audit evidence about whether:
   1. management’s decision to recognise, or to not recognise, the accounting estimates in the financial report; and (Ref: Para. A113‑A114)
   2. the selected measurement basis for the accounting estimates, (Ref: Para. A115)

are in accordance with the requirements of the applicable financial reporting framework.