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Auditing Standard ASA 2020-1 Amendments to Australian Auditing Standards
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Auditing Standard ASA 2020-1 Amendments to Australian Auditing Standards
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ASA 315 addresses how the knowledge and experience of the internal audit function can inform the external auditor’s understanding of the entity and its environment, the applicable financial reporting framework and the entity’s system of internal control, and identification and assessment of risks of material misstatement. ASA 315 [3] also explains how effective communication between the internal and external auditors also creates an environment in which the external auditor can be informed of significant matters that may affect the external auditor’s work.
In addition, those in the entity with operational and managerial duties and responsibilities outside of the internal audit function would ordinarily face threats to their objectivity that would preclude them from being treated as part of an internal audit function for the purpose of this ASA, although they may perform controls activities that can be tested in accordance with ASA 330.12 For this reason, monitoring controls performed by an owner-manager would not be considered equivalent to an internal audit function.
See ASA 315 (as amended), paragraph 614(a).
The application of a systematic and disciplined approach to planning, performing, supervising, reviewing and documenting its activities distinguishes the activities of the internal audit function from other monitoring controls activities that may be performed within the entity.
As explained in ASA 315,[22] significant risks require special audit consideration are risks assessed close to the upper end of the spectrum of inherent risk and therefore the external auditor’s ability to use the work of the internal audit function in relation to significant risks will be restricted to procedures that involve limited judgement. In addition, where the risks of material misstatement is other than low, the use of the work of the internal audit function alone is unlikely to reduce audit risk to an acceptably low level and eliminate the need for the external auditor to perform some tests directly.
See ASA 315 (as amended), paragraph A116A118.