Responses to the Assessed Risks of MaterResponses to the Assessed Risks of Material Misstatement

Responses to the Assessed Risks of Material Misstatement

1. As required by ASA 330,[14] the auditor’s further audit procedures shall be responsive to the assessed risks of material misstatement at the assertion level,[15] considering the reasons for the assessment given to those risks. The auditor’s further audit procedures shall include one or more of the following approaches:
   1. Obtaining audit evidence from events occurring up to the date of the auditor’s report (see paragraph 21);
   2. Testing how management made the accounting estimate (see paragraphs 22–27); or
   3. Developing an auditor’s point estimate or range (see paragraphs 28–29).

The auditor’s further audit procedures shall take into account that the higher the assessed risk of material misstatement, the more persuasive the audit evidence needs to be.[16] The auditor shall design and perform further audit procedures in a manner that is not biased towards obtaining audit evidence that may be corroborative or towards excluding audit evidence that may be contradictory. (Ref: Para. A81–A84)

1. As required by ASA 330,[17] the auditor shall design and perform tests to obtain sufficient appropriate audit evidence as to the operating effectiveness of controls, if:
   1. The auditor’s assessment of risks of material misstatement at the assertion level includes an expectation that the controls are operating effectively, or
   2. Substantive procedures alone cannot provide sufficient appropriate audit evidence at the assertion level.

In relation to accounting estimates, the auditor’s tests of such controls shall be responsive to the reasons for the assessment given to the risks of material misstatement. In designing and performing tests of controls, the auditor shall obtain more persuasive audit evidence the greater the reliance the auditor places on the effectiveness of a control.[18] (Ref: Para. A85–A89)

1. For a significant risk relating to an accounting estimate, the auditor’s further audit procedures shall include tests of controls in the current period if the auditor plans to rely on those controls. When the approach to a significant risk consists only of substantive procedures, those procedures shall include tests of details.[19] (Ref: Para. A90)

Obtaining Audit Evidence from Events Occurring up to the Date of the Auditor’s Report

1. When the auditor’s further audit procedures include obtaining audit evidence from events occurring up to the date of the auditor’s report, the auditor shall evaluate whether such audit evidence is sufficient and appropriate to address the risks of material misstatement relating to the accounting estimate, taking into account that changes in circumstances and other relevant conditions between the event and the measurement date may affect the relevance of such audit evidence in the context of the applicable financial reporting framework. (Ref: Para. A91–A93)