Relevant Controls (Ref: Para. 8(c)(ii))Relevant Controls (Ref: Para. 8(c)(ii))

Relevant Controls (Ref: Para. 8(c)(ii))

1. Matters that the auditor may consider in obtaining an understanding of relevant controls include, for example, the experience and competence of those who make the accounting estimates, and controls related to:

• How management determines the completeness, relevance and accuracy of the data used to develop accounting estimates.
• The review and approval of accounting estimates, including the assumptions or inputs used in their development, by appropriate levels of management and, where appropriate, those charged with governance.
• The segregation of duties between those committing the entity to the underlying transactions and those responsible for making the accounting estimates, including whether the assignment of responsibilities appropriately takes account of the nature of the entity and its products or services (for example, in the case of a large financial institution, relevant segregation of duties may include an independent function responsible for estimation and validation of fair value pricing of the entity’s proprietary financial products staffed by individuals whose remuneration is not tied to such products).

1. Other controls may be relevant to making the accounting estimates depending on the circumstances. For example, if the entity uses specific models for making accounting estimates, management may put into place specific policies and procedures around such models. Relevant controls may include, for example, those established over:

• The design and development, or selection, of a particular model for a particular purpose.
• The use of the model.
• The maintenance and periodic validation of the integrity of the model.