Amendments to ASA 315Amendments to ASA 315

Amendments to ASA 315

1. Existing footnote 38 in paragraph A138 is amended to read as follows:

See ASA 570, paragraphs A2519‒20.

1. Existing paragraph A195 is amended to read as follows:

Risks of material misstatement at the financial report level refer to risks that relate pervasively to the financial report as a whole, and potentially affect many assertions. Risks of this nature are not necessarily risks identifiable with specific assertions at the class of transactions, account balance or disclosure level (e.g., risk of management override of controls). Rather, they represent circumstances that may pervasively increase the risks of material misstatement at the assertion level. The auditor’s evaluation of whether risks identified relate pervasively to the financial report supports the auditor’s assessment of the risks of material misstatement at the financial report level. In other cases, a number of assertions may also be identified as susceptible to the risk, and may therefore affect the auditor’s risk identification and assessment of risks of material misstatement at the assertion level.

Example:

The entity faces operating losses and liquidity issues and is reliant on funding that has not yet been secured. In such a circumstance, the auditor may determineconclude that management’s use of the going concern basis of accounting gives rise to a risk of material misstatement at the financial report level. In this situation, the accounting framework may need to be applied using a liquidation basis, which would likely affect all assertions pervasively.

1. Existing paragraph 4 of Appendix 1 is amended to read as follows:

A business risk may have an immediate consequence for the risk of material misstatement for classes of transactions, account balances, and disclosures at the assertion level or the financial report level. For example, the business risk arising from a significant fall in real estate market values may increase the risk of material misstatement associated with the valuation assertion for a lender of medium-term real estate backed loans. However, the same risk, particularly in combination with a severe economic downturn that concurrently increases the underlying risk of lifetime credit losses on its loans, may also have a longer-term consequence. The resulting net exposure to credit losses may indicate an event or condition that may cast significant doubt on the entity’s ability to continue as a going concern. If so, this could have implications for management’s, and the auditor’s, conclusion as to the appropriateness of the entity’s use of the going concern basis of accounting, and determinationconclusion as to whether a material uncertainty exists. Whether a business risk may result in a risk of material misstatement is, therefore, considered in light of the entity’s circumstances. Examples of events and conditions that may give rise to the existence of risks of material misstatement are indicated in Appendix 2.