an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and
an audit of a financial report, or a complete set of financial statements, for any other purpose.
This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Operative Date
This Auditing Standard is operative for financial reporting periods commencing on or after 15 December 2021, with early adoption, in conjunction with ASA 315 Identifying and Assessing the Risks of Material Misstatement permitted.
Introduction
Scope of this Auditing Standard
This Auditing Standard makes amendments to Australian Auditing Standards. The amendments arise from consequential and conforming changes arising from the issuance of ASA 315 Identifying and Assessing the Risks of Material Misstatement.
Objective
The objective of this Auditing Standard is to make amendments to the following Auditing Standards:
ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards (Issued October 2009 and amended to December 2018)
ASA 210 Agreeing the Terms of Audit Engagements (Issued October 2009 and amended to May 2017)
ASA 230 Audit Documentation (Issued October 2009 and amended to December 2018)
ASA 240 The Auditor's Responsibilities Relating to Fraud in an Audit of a Financial Report (Issued October 2009 and amended to December 2018)
ASA 250 Consideration of Laws and Regulations in an Audit of a Financial Report (Issued May 2017)
ASA 260 Communication With Those Charged with Governance (Issued December 2015 and amended to December 2018)
ASA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management (Issued October 2009 and amended to November 2013)
ASA 300 Planning an Audit of a Financial Report (Issued October 2009 and amended to December 2015)
ASA 320 Materiality in Planning and Performing an Audit (Issued October 2009 and amended to December 2015)
ASA 330 The Auditor's Responses to Assessed Risks (Issued October 2009 and amended to December 2015)
ASA 402 Auditing Considerations Relating to an Entity Using a Service Organisation (Issued October 2009 and amended to November 2013)
Section Introduction - Auditing Standard ASA 2020-1 Amendments to Australian Auditing Standards - Introduction | Zoe
ASA 500 Audit Evidence (Issued October 2009 and amended to December 2018)
ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (Issued October 2009 and amended to July 2011)
ASA 505 External Confirmations (Issued October 2009 and amended to December 2018)
ASA 520 Analytical Procedures (Issued October 2009 and amended to December 2018)
ASA 530 Audit Sampling (Issued October 2009)
ASA 540 Auditing Accounting Estimates and Related Disclosures (Issued December 2018)
ASA 550 Related Parties (Issued October 2009 and amended to November 2013)
ASA 570 Going Concern (Issued December 2015)
ASA 600 Special Considerations-Audits of a Group Financial Report (Issued October 2009 and amended to December 2015)
ASA 610 Using the Work of Internal Auditors (Issued November 2013)
ASA 620 Using the Work of an Auditor's Expert (Issued October 2009)
ASA 700 Forming an Opinion and Reporting on a Financial Report (Issued December 2015 and amended to December 2018)
ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report (Issued December 2015 and amended to December 2018)
ASA 720 The Auditor's Responsibilities Relating to Other Information (Issued December 2015)
ASA 800 Special Considerations – Audits of Financial Reports Prepared in Accordance with Special Purpose Frameworks (Issued July 2016 and amended to May 2017)
Definition
For the purposes of this Auditing Standard, the meanings of terms are set out in each Auditing Standard and in the AUASB Glossary.
Amendments to Auditing Standards
This Standard uses underlining, striking out and other typographical material to identify some of the amendments to a Standard, in order to make the amendments more understandable. However, the amendments made by this Standard do not include that underlining, striking out or other typographical material. Amended paragraphs are shown with deleted text struck through and new text underlined. Ellipses (…) are used to help provide the context within which amendments are made and also to indicate text that is not amended.
Throughout the Australian Auditing Standards all references to the title of ASA 315 have been amended to ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment. In addition to the Auditing Standards listed in paragraph 5, the following Auditing Standards follow the same amendment to the title of ASA 315.
ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information (Issued October 2009 and amended to May 2017)
ASA 510 Initial Audit Engagements—Opening Balances (Issued October 2009 and amended to December 2015)
ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity (Issued October 2009 and amended to July 2013)
Amendments to ASA 200
Existing paragraph 7 is amended to read follows:
The ASAs contain objectives, requirements and application and other explanatory material that are designed to support the auditor in obtaining reasonable assurance. The ASAs require that the auditor exercise professional judgement and maintain professional scepticism throughout the planning and performance of the audit and, among other things:
Identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, the applicable financial reporting framework and including the entity’s system of internal control.
…
Existing paragraph 13 is amended to read as follows:
For purposes of the ASAs, the following terms have the meanings attributed below:
…
(n) Risk of material misstatement – The risk that the financial report is materially misstated prior to audit. This consists of two components, described as follows at the assertion level: (Ref: Para. A3)
Inherent risk – The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.
Control risk – The risk that a misstatement that could occur in an assertion about a class of transactions, account balance or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity’s internal controls.
…
Following existing paragraph A2, and before the heading An audit of a financial report the following sub-heading is inserted:
Risk of Material Misstatement (Ref: Para. 13(n))
Following the sub-heading inserted above, the following paragraph A3 is inserted:
For the purposes of the ASAs, a risk of material misstatement exists when there is a reasonable possibility of:
A misstatement occurring (i.e., its likelihood); and
Being material if it were to occur (i.e., its magnitude).
As a result of the insertion of the paragraph above, subsequent paragraphs of this Auditing Standard are re-numbered and references to these paragraphs are updated accordingly.
Existing footnote 17 in paragraph A30 is amended to read as follows:
See ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, paragraph 916.
Existing paragraph A40 is amended to read as follows:
Inherent risk is influenced by inherent risk factors. higher for some assertions and related classes of transactions, account balances, and disclosures than for others. Depending on the degree to which the inherent risk factors affect the susceptibility to misstatement of an assertion, the level of inherent risk varies on a scale that is referred to as the spectrum of inherent risk. The auditor determines significant classes of transactions, account balances and disclosures, and their relevant assertions, as part of the process of identifying and assessing the risks of material misstatement. For example, it may be higher for complex calculations or for accounts balances consisting of amounts derived from accounting estimates that are subject to significant estimation uncertainty may be identified as significant account balances, and the auditor’s assessment of inherent risk for the related risks at the assertion level may be higher because of the high estimation uncertainty.
The following paragraph A42 is inserted following the paragraph above:
External circumstances giving rise to business risks may also influence inherent risk. For example, technological developments might make a particular product obsolete, thereby causing inventory to be more susceptible to overstatement. Factors in the entity and its environment that relate to several or all of the classes of transactions, account balances, or disclosures may also influence the inherent risk related to a specific assertion. Such factors may include, for example, a lack of sufficient working capital to continue operations or a declining industry characterised by a large number of business failures.
As a result of the insertion of the paragraph above, subsequent paragraphs of this Auditing Standard are re-numbered and references to these paragraphs are updated accordingly.
Existing paragraph A41 is amended to read as follows:
Control risk is a function of the effectiveness of the design, implementation and maintenance of internal controls by management to address identified risks that threaten the achievement of the entity’s objectives relevant to preparation of the entity’s financial report. However, internal control, no matter how well designed and operated, can only reduce, but not eliminate, risks of material misstatement in the financial report, because of the inherent limitations of internal controls. These include, for example, the possibility of human errors or mistakes, or of controls being circumvented by collusion or inappropriate management override. Accordingly, some control risk will always exist. The ASAs provide the conditions under which the auditor is required to, or may choose to, test the operating effectiveness of controls in determining the nature, timing and extent of substantive procedures to be performed.18