Artículo 29. Footnotes (AS 2110 - Identifying and Assessing Risks of Material Misstatement):

1 Paragraphs .05-.08 of AS 1101, Audit Risk . 2 Terms defined in Appendix A, Definitions , are set in boldface type the first time they appear. 3 AS 2401, Consideration of Fraud in a Financial Statement Audit , discusses fraud, its characteristics, and the types of misstatements due to fraud that are relevant to the audit, i.e. , misstatements arising from fraudulent financial reporting and misstatements arising from asset misappropriation. Also, AS 2410, Related Parties , requires the auditor to perform procedures to obtain an understanding of the company's relationships and transactions with its related parties that might reasonably be expected to affect the risks of material misstatement of the financial statements. 4 AS 1105, Audit Evidence , describes further audit procedures as consisting of tests of controls and substantive procedures. 4A The term “engagement team,” as used in this standard, has the same meaning as defined in Appendix A of AS 2101, Audit Planning . 5 AS 1105.11 discusses financial statement assertions. 6 The auditor should look to the requirements of the Securities and Exchange Commission for the company under audit with respect to the accounting principles applicable to that company. 7 AS 2405, Illegal Acts by Clients , discusses the auditor's consideration of laws and regulations relevant to the audit. 7A See AS 1206, Dividing Responsibility for the Audit with Another Accounting Firm . 7B See AS 2401.66-.67A. 8 Paragraphs .21-.22 of this standard discuss components of internal control over financial reporting. 9 Paragraph .13 of AS 2201, An Audit of Internal Control Over Financial Reporting That is Integrated with An Audit of Financial Statements , states, "The size and complexity of the company, its business processes, and business units, may affect the way in which the company achieves many of its control objectives. The size and complexity of the company also might affect the risks of misstatement and the controls necessary to address those risks." 10 AS 1105.10 . 11 Different internal control frameworks use different terms and approaches to describe the components of internal control over financial reporting. 12 See Securities Exchange Act Release No. 34-47986 (June 5, 2003) for a description of the characteristics of a suitable, recognized framework. 13 AS 2201.05. 14 AS 2201.25. 15 AS 2201.A3. 16 Examples of such events and conditions include depreciation and amortization and conditions affecting the recoverability of assets. 16A See paragraph .A3 of AS 1301, Communications with Audit Committees . 16B See U.S. Securities and Exchange Commission, Financial Reporting Release No. 72 , Interpretation: Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations (Dec. 19, 2003), 68 FR 75056 (Dec. 29, 2003), at Section V ("Critical Accounting Estimates") for management's responsibilities related to critical accounting estimates . 16C See paragraph .34 of this standard. 17 Paragraphs .12-.13 of this standard. 18 Also see paragraph .B5 of Appendix B of this standard. 19 In some companies, internal auditors or others performing an equivalent function contribute to the monitoring of controls. AS 2605, Consideration of the Internal Audit Function , establishes requirements regarding the auditor's consideration and use of the work of the internal audit function. 20 See AS 2201.34-.38. 21 Paragraphs .16-.35 of AS 2301, The Auditor's Responses to the Risks of Material Misstatement. 22 AS 2201.B1. 23 AS 2201.22. 24 The entity-level controls included in AS 2201.24 include controls related to the control environment; the company's risk assessment process; centralized processing and controls; controls over the period-end financial reporting process; and controls to monitor other controls. 25 See PCAOB Rule 3501(a)(i), which defines "affiliate of the accounting firm." 26 Paragraph .07 of AS 2101. 27 Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. 28 Paragraphs .52-.53 of this standard. 29 See also paragraph .29 of AS 2810, Evaluating Audit Results . 30 AS 2401.13. 31 AS 2810.20-.23 establish further requirements for evaluating whether misstatements might be indicative of fraud and determining the necessary procedures to be performed in those situations. 31A See AS 2401.66-.67A. 32 AS 2301.16-.35 . 33 AS 2201.A10 states: An account or disclosure is a significant account or disclosure if there is a reasonable possibility that the account or disclosure could contain a misstatement that, individually or when aggregated with others, has a material effect on the financial statements, considering the risks of both overstatement and understatement. The determination of whether an account or disclosure is significant is based on inherent risk, without regard to the effect of controls. 34 AS 2201.A9 states: A relevant assertion is a financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated. The determination of whether an assertion is a relevant assertion is based on inherent risk, without regard to the effect of controls. 35 The auditor might perform substantive auditing procedures because his or her assessment of the risk that undetected misstatement would cause the financial statements to be materially misstated is unacceptably high or as a means of introducing unpredictability in the procedures performed. See AS 2810.11, .14, and .25 , for further discussion about undetected misstatement. See AS 2201.61 and AS 2301.5c, for further discussion about the unpredictability of auditing procedures. 35A See also AS 2101.11–.12, which describe additional risk assessment considerations for multi-location engagements. 36 AS 2301 discusses the auditor's response to fraud risks and other significant risks. 37 AS 2201.14 presents examples of controls that address fraud risks. 38 See also AS 2301.46.