Analysis of Responses to Question 4 of the Exposure Draft

Transcription

1 Agenda Item 2-C Analysis f Respnses t Questin 4 f the Expsure Draft Sectin I: Questin included in Expsure Draft 1. The fllwing questin was asked in the expsure draft: 4) When inherent risk is nt lw (see paragraphs 13, 15 and 17 20): a) Will these requirements supprt mre effective identificatin and assessment f, and respnses t, risks f material misstatement (including significant risks) relating t accunting estimates, tgether with the relevant requirements in ISA 315 (Revised) and ISA 330? b) D yu supprt the requirement in ED-540 (Revised) fr the auditr t take int accunt the extent t which the accunting estimate is subject t, r affected by, ne r mre relevant factrs, including cmplexity, the need fr the use f judgment by management and the ptential fr management bias, and estimatin uncertainty? c) Is there sufficient guidance in relatin t the prpsed bjectives-based requirements in paragraphs 17 t 19 f ED-540? If nt, what additinal guidance shuld be included? Sectin II: Staff Analysis f Respndents Views 1 Mnitring Grup Respnses 2. A summary f the respnses frm Mnitring Grup members respnses related t risk factrs, the structure f ED-540, and the applicatin material is included in the Appendix. Sectin II-A: Risk Factrs General Observatins 3. In identifying and assessing the risk f material misstatement, many respndents supprted the three risk factrs (cmplexity, judgement and estimatin uncertainty) included in Expsure Draft f Prpsed ISA 540 (ED-540) In this paper the fllwing terms have been used: A respndent = 1; A few = 2 3; Sme = 4 6; Several = 7 11; Many = 12 34; Majrity = mre than 50%; and Significant majrity = greater than ~80%. 2 Prpsed ISA 540 (Revised), Auditing Accunting Estimates and Related Disclsures 3 Regulatrs: EBA, ESMA, IAIS, IFIAR, IRBA, UKFRC, NSSs: AUASB, CAASB, HKICPA, JICPA, Firms: EYG, CEAOB, CHI, DTT, PKF, SRA, NZAuASB, Member Bdies: AE, ANAN, IAAA, ICAEW, ICAG, ICAS, ICAZ, SAICA, SMPC, Public Sectr Organizatin: ACAG, AGA, AGC, CIPFA, INTOSAI, PAS, Individuals & Others: CYGNUS Prepared by: IAASB Staff (Octber 2017) Page 1 f 13

2 4. There were mixed views as t whether the respnse t the assessed risk f material misstatement shuld be based arund each risk factr. Respndents wh supprted the apprach taken by the Bard generally did nt elabrate why they supprted it. 4 On the ther hand, respndents wh did nt supprt the Bard s apprach prvided many reasns why the respnse t the assessed risk f material misstatement shuld nt be based arund each risk factr. 5. Of the Mnitring Grup members the Basel Cmmittee n Banking Supervisin (Basel Cmmittee) and Internatinal Assciatin f Insurance Supervisrs (IAIS) were generally supprtive f basing the respnse t the assessed risk f material misstatement n the risk factrs. On the ther hand Internatinal Organizatin f Securities Cmmissins (IOSCO) nted significant cncerns with the apprach taken, while Internatinal Frum f Independent Audit Regulatrs (IFIAR) was f the view that the prpsals are a step in the right directin. Cmments Received n the Risk Factrs 6. The fllwing suggestins were received n the risk factrs: Make a clearer linkage between paragraph 10 (Risk Assessment) and the three factrs in paragraph 13 (identifying and assessing the risk f material misstatement). 5 Clarify whether estimates can nly be assessed as lw inherent risk where nne f the risk factrs are relevant r whether anther basis fr cncluding n lw inherent risks is apprpriate. 6 The risk factrs are present in all accunting estimates s the standard shuld fcus n the extent f the factrs and nt its existence. 7 Estimatin uncertainty is present in all accunting estimates and shuld therefre likely be relevant in the identificatin and assessment f risks f material misstatement and related further prcedures. 8 The factrs may need t be revised because f the revisin f ISA 315 (Revised) It was questined whether the right factrs were chsen and a recmmendatin was received t select the fllwing three factrs: 11 Access t data and assumptins; Subjectivity; and 4 Regulatr: IAIS, CEAOB NSSs: NZAuASB, Public Sectr: ACAG, AGA, AGC, CIPFA, INTOSAI, PAS, Member Bdies: IAAA, ICAG, ICAS, ICAZ, Individuals & Others: CYGNUS, Firms: PKF, SRA 5 Individuals & Others: NDEG, Firms: PWC 6 Regulatrs: IFIAR 7 Regulatrs: IAIS, NSS: NBA 8 Firms: DTT 9 NSSs: IDW 10 ISA 315 (Revised), Identifying and Assessing the Risks f Material Misstatement thrugh Understanding the Entity and Its Envirnment 11 NSSs: NBA Page 2 f 13

3 Cmplexity f the calculatin. Calls fr additinal applicatin material t explain: Whether estimatin uncertainty shuld be cnsidered mre prminently; 12 Whether it is pssible t identify risk factrs but still cnclude that inherent risk is lw; 13 Hw the risk factrs relate t the different cmpnents f an accunting estimate (data, assumptins, mdel/methd). 14 Risk Factrs Other than Cmplexity, Judgement and Estimatin Uncertainty 7. Several respndents cmmented n risk factrs ther than cmplexity, judgement and estimatin uncertainty. The cmments received included: It was questined which prcedures the practitiner shuld perfrm when the inherent risk is 'nt lw' because f a factr ther than cmplexity, judgement and estimatin uncertainty. 15 Mre emphasis shuld be placed n risk factrs ther than cmplexity, judgement and estimatin uncertainty. 16 It was suggested t include mre applicatin material that explains that there may be ther factrs than cmplexity, judgement and estimatin uncertainty; and 17 It was suggested t expand the regulatry factrs in paragraph A The Risk Factrs in Wrk Effrt 8. Many respndents cited reasns why it wuld be difficult t determine the apprpriate respnse t the three risk factr requirements in the respnse t the assessed risk f material misstatement. Fr example, it was nted that the distinctin between the factrs is artificial and practitiners will nt be able t cnnect the wrk effrt t each factr. 19 As a result, the auditr might nt be able t adequately address the risk f material misstatement at the assertin level. 20 Others nted that the factrs are unnecessarily cmplex and d nt take int accunt the apprach that is taken in practice, being the three testing strategies in paragraph 15(a). 21 It was als nted that the fcus n the risk factrs, may result in nt btaining a hlistic view f the accunting estimate Firms: GTI 13 Firms: GTI 14 Firms: KPMG 15 Regulatrs: IOSCO, IRBA, Member Bdies: SMPC 16 Firms: DTT 17 Firms: GTI 18 Member Bdies: SMPC 19 NSSs: CNCC-CSOEC, Member Bdies: ICAEW, SMPC, Firms: PWC, 20 Individuals & Others: NDEG, Firms: PWC 21 Firms: EYG, Member Bdies: ISCA, NSSs: CAASB 22 Member Bdies: AICPA Page 3 f 13

4 9. Of the mnitring grup members, IOSCO had significant cncerns with the apprach taken and nted that the Bard shuld cnsider whether paragraph may be verly cmplex, unclear, and cnsequently culd result in incnsistent applicatin by auditrs. 10. Respndents nted the fllwing reasns why the risk factrs shuld nt be used in the respnse t the assessed risk f material misstatement: The interrelatinships between the risk factrs see next paragraph; The nature, timing and extent f the audit prcedures shuld be based n the risk f material misstatement at the assertin level and financial statement level and nt n the risk factrs as the factrs are nt what culd g wrng. A few respndents were f the view that the factrs shuld be cnsideratins, cnsistent with the apprach in ISA and the apprach taken by the Public Cmpany Accunting Oversight Bard. 24 The apprach taken in ED-540 culd lead t a cmplicated matrix apprach t dcumenting identified risks, with a cmbinatin f assertins and risk factrs. 25 Paragraphs f ED-540 may be viewed as limiting further audit prcedures nly t risks f material misstatement that result discretely frm the three factrs, given the cnstruct f the paragraphs and the seemingly narrw fcus f each ne. 26 Interrelatinship between Risk Factrs 11. With respect t the interrelatinships between the risk factrs and the effect that may have, respndents were f the view that either mre guidance is needed t explain the interrelatinships, 27 r that the interrelatinships make it challenging t determine the apprpriate respnse t the assessed risk f material misstatement Several respndents 29 nted that categrizing respnses int three discrete risk factrs is nt cnsistent with management s prcess fr making estimates. Often management cnsiders accunting estimates mre in terms f data, assumptins and methds / mdels. It was nted that the ptential incnsistency between hw management determines accunting estimates and hw the auditr is asked t audit thse estimates culd be prblematic as the auditr may ask management t prvide infrmatin fr audit purpses that management has nt cnsidered as part f its wn prcess. In additin, it was nted that the cmpartmentalizatin f the three risk factrs is cmplicated as they are ften integrated and verlapping. Fr example, cmplexity is ften a factr raising r lwering estimatin uncertainty, and the applicatin f significant judgement frm management may be the respnse theret. 23 ISA 240, The Auditr s Respnsibilities Relating t Fraud in an Audit f Financial Statements 24 NSSs: AUASB, Member Bdies: IBRACON, Individuals & Others: NDEG, Firms: PWC 25 Member Bdies: AICPA, Individuals & Others: NDEG, Firms: PWC 26 Firms: DTT 27 Regulatrs: UKFRC, ICAP, NSSs: JICPA 28 Firms: CHI, DTT, EYG, GTI, Member Bdies: SMPC, 29 NSSs: AUASB, CAASB, NBA, NZAuASB, Member Bdies: CPAA, ICAEW, NASBA, Firms: BDO, EYG, GTI Page 4 f 13

5 13. It was als nted that: The risk factrs are ften nt sufficiently separable t guide an effective audit apprach. 30 It is difficult t distinguish between factrs as in mst cases tw r three factrs are present. 31 The driver f the risk f material misstatement is estimatin uncertainty. Cmplexity and judgment are related t this factr. 32 Estimatin uncertainty and judgement are clsely related. 33 In sme instances, management bias is linked t the risk factr judgment and in ther cases it is mentined separately One mnitring grup member nted that given the difficulty in distinguishing between the three risk factrs, auditrs may default t addressing all the testing bjectives in paragraphs In that case, they may be cnfused by the seemingly verlapping nature f sme testing bjectives. The mnitring grup member highlighted specific areas in which they questined why certain prcedures were required fr ne factr but nt fr anther. Fr example: 35 Why data testing wuld nt be relevant fr all accunting estimates; Whether management's understanding f significant data (paragraph 17(c)) wuld als nt apply t judgement; Whether the cmplex mdelling (requirement 18(c)) wuld als apply t cmplexity; Whether requirement 18(a) (iii) shuld als include significant data. Sectin II-B: Structure f the Standard 15. Many respndents cmmented n the structure f ED-540. It was nted that the structure is: Unclear and nt intuitive; 36 Cmplex; 37 and Nt sufficiently bjective based, t granular/ prescriptive. 38 These cmments mainly related t the wrk effrt paragraphs; paragraph Regulatrs: IOSCO, Firms: DTT 31 Firms: BDO, CHI,, Member Bdies; SMPC 32 Regulatrs: IOSCO, Member Bdies; ACCA-CAANZ, ICAS 33 Firms: GTI 34 Member Bdies: CPAA, ICAEW,SMPC, NSSs: NBA,, Firms: BDO 35 Regulatrs: IOSCO 36 Regulatrs: IOSCO, Firms: DTT, EYGPWC, Member Bdies: CAASB, CPAA, MAASB, Individuals & Others: NDEG, 37 Firms: DTT, KPMG, Public Sectr: AGC, AGNZ, Member Bdies: ACCA-CAANZ AICPA, ICEAW, 38 NSSs: NZAuASB, Firms: GTI, Member Bdies: EFAA, SMPC, Public Sectr: AGC Page 5 f 13

6 16. As a result the standard may: Be difficult t apply in practice; Lead t incnsistencies in applicatin and interpretatin; Drive a checklist mentality; and Result in less prfessinal judgement and prfessinal skepticism. 17. With respect t the structure f the wrk effrt sectin respndents nted that: The testing strategies fr lw inherent risk accunting estimates, as included in paragraph 15(a), are applicable t all accunting estimates, including thse with an inherent risk that is nt lw. 39 On the ther hand, the testing bjectives in paragraph may als be applicable fr estimates with lw inherent risk. 40 Certain testing bjectives in paragraph are nt always related t a single risk factr (e.g. certain testing bjectives fr cmplexity may als be applicable fr judgement). 41 It will cause significant increase in wrk effrt (withut imprving audit quality). 42 It was nt clear hw t apply para t subsequent events testing and develping a pint estimate r range. 43 It was nted that subsequent events testing may be particularly useful fr sme lw risk estimates, 44 and that if the utcme is knwn at the date f the reprt, then the required understanding in paragraph 10 shuld be minimal Respndents therefre suggested several imprvements t the wrk effrt: T make the identificatin, assessment and respnse t risks f material misstatement mre intuitive fr the auditr, as well as t be cnsistent with hw management makes the estimate and hw audit evidence is available, several respndents were f the view that ED-540 culd describe relevant risk factrs fr an estimate based n hw they relate t the different cmpnents f the estimate (i.e. data, assumptins and methds/mdels). 46 The bjectives-based requirements in paragraphs culd be cnflated int a single list fcused n the underlying cmpnents f accunting estimates (i.e., methd, significant data, significant assumptins, mdel) accmpanied by apprpriate evaluatins f estimatin 39 Regulatrs: IOSCO Firms: BDO, DTT, EYG, GTI, KPMG, PWC Member Bdies: AICPA, ICAEW, Individuals & Others: NDEG, 40 Regulatrs: IOSCO Firms: DTT, EYG,, PWC Member Bdies: CAQ, Individuals & Others: NDEG, 41 Regulatrs: EYG, PWC, Member Bdies: CAQ, Individuals & Others: NDEG, 42 Member Bdies ACCA-CAANZ, AE 43 Firms: GTI, KPMG, PWC 44 Member Bdies: IBRACON, Individuals & Others: NDEG 45 Firms: KPMG 46 Firms: DTT KPMG, EYG, PWC, Member Bdies: AICPA, ICAEW, Individuals & Others: NDEG,, Page 6 f 13

7 uncertainty that arise frm these underlying cmpnents. 47 The testing bjectives in paragraph culd be mved t the applicatin material; 48 Subsequent events testing shuld be included mre prminently. 49 Paragraph 20 (requirements when develping an auditrs range) shuld apply whenever a range is develped. 50 Enhance the identificatin f the risks f material misstatement (paragraph 13) such that the further audit prcedures are respnsive and result in sufficient apprpriate audit evidence. Paragraph 13 and related applicatin material shuld als make it mre clear that fr difficult r cmplex accunting estimates, there will likely be mre risks f material misstatement and als that they are likely t be assessed as higher r significant. Fr simple accunting estimates, there will be fewer risks f material misstatement and they may be assessed as lwer r lw One mnitring grup member asked the Bard t cnsider whether all (r a subset f) testing bjectives in paragraphs shuld be required t be met fr all accunting estimates, irrespective f the reasn fr the assessment f their inherent risk as 'lw' r 'nt lw' risk, and whether r nt the auditr places reliance n cntrls. Under this apprach, auditrs wuld respnd t the assessed risks f material misstatement by varying the nature, timing, and extent f the further audit prcedures perfrmed in respnse t the defined testing bjectives. 52 Sectin II-C: Applicatin Material 20. Many respndents nted that sufficient guidance is included in the ED Sme respndents were f the view that t much guidance is included, 54 while thers, als respndents that were f the view that sufficient guidance was included in ED-540, came up with areas where further guidance wuld be useful. 21. In additin t the areas highlighted in sectin II, III and IV, respndents identified the fllwing areas where further guidance culd be useful: Include the flw chart; 55 Cmplex estimates; Regulatrs: IOSCO Firms: EYG, Member Bdies: AICPA, ISCA, Public Sectr: GAO, 48 Member Bdies: ICAEW, KICPA 49 Member Bdies: AICPA, Firms: GTI, PWC, Individuals & Others: NDEG, 50 Firms: EYG 51 Firms: DTT 52 Regulatrs: IOSCO 53 NSSs: HKICPA, Public Sectr: ACAG, AGA, AGC, CIPFA, INTOSAI, PAS,,Member Bdies: ICAG, ICAP ICAZ, Individuals & Others: CYGNUS, Firms: RSM 54 NSSs: AUASB,IDW, NZAuASB, Member Bdies: KICPA, 55 Regulatrs: BCBS, NSSs: AUASB, CAASB, NBA, NZAuASB, Member Bdies: AE, EFAA, IBR-IRE ICAEW, SMPC,, Firms: RSM, 56 Regulatrs: BCBS, ESMA, Member Bdies: CAI, NASBA, Investrs & Analysts: CFA, Firms: KPMG, Page 7 f 13

8 57 58 Internal cntrls, fr example by including paragraph 95 f IAPN 1000; Specialized skills and knwledge; 59 Frward lking infrmatin; 60 Simple estimates. It was suggested t delete the cnsideratins fr smaller and medium sized entities sectin and instead include guidance n hw t audit simple accunting estimates; 61 The extent f further audit prcedures and hw t respnd if mre than ne factr is present; 62 Hw the auditr assesses an accunting estimate s sensitivity; 63 Hw the criteria in paragraph 20 are met; 64 Matters t cnsider when changes are made t the financial reprting framewrk; Leveraging n the wrk carried ut in ther ISAs (ISA 240/ ISA 250); Stress testing, by the auditr, f inputs t a mdel/methd; 68 Wrk effrt that is required when a significant risk f material misstatement is identified; 69 and Include paragraph 26(d) and 28 frm the Explanatry Memrandum in the applicatin material. 70 When the auditr is unable t btain sufficient apprpriate audit evidence n management s pint estimate; Respndents that were f the view that t much guidance was included nted a number f paragraphs within ED-540 that cntain unnecessary cntent because it: States the bvius; Is educatinal in nature; 57 Regulatrs: BCBS, CEAOB, UKFRC, Member Bdies: NASBA 58 Internatinal Auditing Practice Ntes (IAPN) 1000, Special Cnsideratins in Auditing Financial Instruments 59 Investrs & Analysts: CFA, Regulatrs: ESMA, Member Bdies: NASBA 60 Regulatrs: EBA, BCBS, Member Bdies: ICAEW 61 Member Bdies: AICPA 62 Regulatrs: BCBS 63 Regulatrs :ESMA 64 NSSs: HKICPA 65 NSSs: HKICPA 66 Regulatrs: ESMA 67 ISA 250, Cnsideratin f Laws and Regulatins in an Audit f Financial Statements 68 Regulatrs: IRBA 69 Firms: BDO 70 Member Bdies: AICPA 71 Regulatrs: IOSCO Page 8 f 13

9 Discusses fundamental cncepts which shuld be well understd by the auditr and are nt specific t auditing accunting estimates; r Repeats issues already addressed in the expsure draft. 23. Respndents highlighted several paragraphs in the applicatin material, r parts theref, that shuld be mved t the requirements: A73, examples f accunting estimates fr which the inherent risk may nt be lw; 72 A78, ther relevant factrs that the auditr may cnsider in identifying and assessing the risks f material misstatements; 73 A96, when the further audit prcedures in paragraph 15(a) d nt prvide sufficient apprpriate audit evidence; 74 A98, when the auditr intends t rely n relevant cntrls r substantive prcedures alne cannt prvide sufficient and apprpriate audit evidence; 75 A101, cnsideratin f ther available valuatin cncepts, techniques r factrs, types f assumptins r surces f data that, in the circumstances, might have been mre apprpriate r mre generally accepted; 76 A105, understanding r interpreting data; 77 A120-A123, disclsures that may be required by the applicable financial reprting framewrk and matters that may be relevant in btaining sufficient apprpriate audit evidence abut the reasnableness f management s pint estimate and related disclsures; 78 and A126; auditr requesting management t cnsider alternative assumptins r t prvide additinal disclsure relating t estimatin uncertainty in cases when the auditr believes that management has nt apprpriately understd r addressed estimatin uncertainty One respndent nte that the relatinship between paragraph 13, 15 and is nt clear Regulatrs: BCBS, EBA 73 Regulatrs: BCBS, EBA, NSSs: HKICPA 74 Public Sectr: AGNZ 75 Regulatrs: ESMA 76 Regulatrs: ESMA,UKFRC 77 Regulatrs: UKFRC 78 Regulatrs: EBA, ESMA, UKFRC 79 Regulatrs: ESMA, UKFRC 80 NSSs: MAASB Page 9 f 13

10 Sectin II-D: Other Cmments Significant Risk 25. A few respndents, including ne Mnitring Grup member, supprted mving away frm requirements that respnd specifically t significant risk 81 while ne respndent cautined that an unintended cnsequence might be that auditrs cease t identify significant risks ver accunting estimates, since an identified risk n lnger meets the definitin f a significant risk as defined in paragraph 4(e) f ISA 315 (Revised) Other cmments n the rle that significant risk plays in ED-540 include that: In paragraph 13 reference is made t significant risks but the cncept f significant risk des nt cme back in paragraph 15, which fcusses n lw, nt lw inherent risk. Sme respndents deemed this t be incnsistent with ISA 315 (Revised) and ISA These respndents suggested t prvide mre guidance/ clarificatin. 84 One respndent nted supprt fr nt requiring prcedures fr significant risk. 85 Mre guidance wuld be useful n determining significant risk. 86 The standard des nt prvide sufficient guidance what the auditr shuld d when a significant risk is identified. 87 There culd be a strnger link established between an inherent risk that is nt lw and a significant risk. 88 Specialized Skills and Knwledge 27. A few respndents cmmented n the paragraphs within ED-540 that deal with using specialized skills and knwledge (paragraph 14 and 16). One respndents was f the view that there is t much fcus n using specialized skills and that it wuld be better t include a reference t ISA 620, 8990 while thers highlighted the imprtance f paragraph 14 and Others suggested t merge the tw requirements int ne verall requirement, 92 r did nt supprt a separate requirement at the risk assessment stage as the auditr shuld be able t evaluate the risks f material misstatement Regulatrs: IFIAR, Member Bdies: ICAEW, Individuals& Others: NDEG 82 Firms: CHI 83 ISA 330, The Auditr s Respnses t Assessed Risks 84 Public Sectr: INTOSAI, PAS, Member Bdies: IBRACON, IBR-IRE, Firms: CHI, RSM, 85 Regulatrs: UKFRC 86 Member Bdies: AE 87 Regulatrs: IRBA, Public Sectr: ACAG 88 Regulatrs: IAIS 89 NSSs: NBA 90 ISA 620, Using the Wrk f an Auditr s Expert 91 Regulatrs: ESMA, Investrs & Analysts: CFA 92 Firms: DTT, PWC 93 Individuals& Others: NDEG Page 10 f 13

11 Drafting 28. Many drafting suggestins were received which will be taken int accunt when the Task Frce has decided n a way frward. Page 11 f 13

12 Appendix Mnitring Grup Respnses Related t Risk Factrs, the Structure f ED-540, and Applicatin Material Risk Factrs 1. Three Mnitring Grup members supprted the risk factrs (cmplexity, judgement and estimatin uncertainty) in identifying and assessing the risk f material misstatement. 94 One was ppsed t the risk factrs because it was nt seen t be pssible t separate the risk factrs sufficiently t guide an effective audit respnse Mnitring Grup members made the fllwing suggestins with respect t the risk factrs: Clarify whether estimates can nly be assessed as lw inherent risk where nne f the risk factrs are relevant. 96 Fcus n the extent f the factrs and nt their existence, as the risk factrs are present in all accunting estimates. 97 Clarify what prcedures the practitiner shuld perfrm when the inherent risk is 'nt lw' because f a factr ther than cmplexity, judgement and estimatin uncertainty. 98 With respect t interrelatinship between the risk factrs, ne Mnitring Grup member nted that the driver f the risk f material misstatement is estimatin uncertainty, and cmplexity and judgment are related t this factr. 99 Respnse t the Assessed Risk f Material Misstatement 3. With respect t basing the respnse t the assessed risk f material misstatement n the risk factrs, tw Mnitring Grup members 100 were generally supprtive. One Mnitring Grup Member 101 had significant cncerns with the apprach taken, while the furth Mnitring Grup member 102 was f the view that the prpsals are a step in the right directin. 4. One Mnitring Grup member 103 nted that there might be instances when the testing strategies fr lw inherent risk accunting estimates, as included in paragraph 15(a), are applicable t all accunting estimates and was f the view that the testing bjectives in paragraphs shuld be required fr all accunting estimates, irrespective f the reasn fr the assessment f their inherent risk as 'lw' r 'nt lw' risk, and whether r nt the auditr places reliance n cntrls. 94 BCBS, IFIAR, IAIS 95 IOSCO 96 IFIAR 97 IAIS 98 BCBS, IOSCO 99 IOSCO 100 BCBS, IAIS 101 IOSCO 102 IFIAR 103 IOSCO Page 12 f 13

13 5. The same Mnitring Grup Member 104 highlighted several areas where there is lack f clarity as t why certain testing bjectives were cnsidered relevant t ne but nt the ther reasns fr the auditr's risk assessment. It was therefre suggested t include the testing bjectives in paragraphs 15 and in a single list that applies irrespective f the assessed inherent risk. 6. With respect t the Bard s apprach n significant risk, ne Mnitring Grup member supprted mving away frm requirements that respnd specifically t significant risk. 105 Anther Mnitring Grup member suggested there culd be a strnger link established between an inherent risk that is nt lw and a significant risk. 106 Applicatin Material 7. One Mnitring Grup member 107 was f the view that sufficient applicatin material was included t supprt the bjective based requirements in paragraph 17-19, but nted cncerns abut the ptential fr cnfusin arund the use f sme key wrds given that they are used in multiple cntext in the ED. Tw Mnitring Grup members 108 identified several areas where further guidance wuld be useful. One Mnitring Grup member 109 als suggested that sme paragraphs f the applicatin material, r parts theref, shuld be mved t the requirements. 104 IOSCO 105 IFIAR 106 IAIS 107 IAIS 108 BCBS, IFIAR 109 BCBS Page 13 f 13