Auditing Standard ASA 600 Special Considerations—Audits of a Group Financial Report (Including the Work of Component Auditors)
Examples of Events or Conditions that MaExamples of Events or Conditions that May Give Rise to Risks of Material Misstatement of the Group Financial Report
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Examples of Events or Conditions that May Give Rise to Risks of Material Misstatement of the Group Financial Report
The following are examples of events (including transactions) and conditions that may indicate the existence of risks of material misstatement of the group financial report, whether due to fraud or error, including with respect to the consolidation process. The examples provided by inherent risk factor cover a broad range of events and conditions; however, not all events and conditions are relevant to every group audit engagement and the list of examples is not exhaustive. The events and conditions have been categorised by the inherent risk factor that may have the greatest effect in the circumstances. Importantly, due to the interrelationships among inherent risk factors, the example events and conditions also are likely to be subject to, or affected by, other inherent risk factors to varying degree. Also see ASA 315, Appendix 2.
| Inherent Risk Factor | Examples of Events or Conditions that May Give Rise to the Existence of Risks of Material Misstatement of the Group Financial Report at the Assertion Level: |
|---|---|
| Complexity | The existence of complex transactions that are accounted for in more than one entity or business units in the group.The application of accounting policies by entities or business units in the group that differ from those applied to the group financial report.Accounting measurements or disclosures that involve complex processes used by entities or business units in the group, such as accounting for complex financial instruments.Operations that are subject to a high degree of complex regulation in multiple jurisdictions, or entities or business units in the group that operate in multiple industries that are subject to different types of regulation. |
| Subjectivity | Judgements regarding which entities or business units in the group require incorporation of their financial information in the group financial report in accordance with the applicable financial reporting framework, for example, whether any special-purpose entities or non-trading entities exist and require incorporation.Judgements regarding the correct application of the requirements of the applicable financial reporting framework by entities or business units in the group. |
| Change | Frequent acquisitions, disposals or reorganisations. |
| Uncertainty | Entities or business units in the group operating in foreign jurisdictions that may be exposed to factors such as unexpected government intervention in areas such as trade and fiscal policy, and restrictions on currency and dividend movements; and fluctuations in exchange rates. |