In applying professional scepticism, the assurance practitioner shall recognise the possibility that a deficiency in design, misstatement in the description of the system, deficiency in implementation or deviation in the operating effectiveness of controls due to fraud could exist, notwithstanding the assurance practitioner’s past experience of the honesty and integrity of the entity’s management and those charged with governance.
The assurance practitioner shall discuss with the engagement team how and where the entity’s controls may be susceptible to circumventiondue to fraud, including how fraud might occur. The discussion shall occur setting aside beliefs that the engagement team members may have that management and those charged with governance are honest and have integrity.
Planning and Performing the Engagement
In planning the engagement, if the scope of the engagement is based on overall control objectives, thenthe assurance practitioner shall identify, select or develop specific control objectives, to achievethe agreed overall control objectivesagainst which the design of controls can be tested.If a description of the system is included in the scope of the engagement the specific control objectives are ordinarilyincluded in that description. Inan attestation engagement, if there is nodescription,the specific control objectives ordinarily are identifiedin documentation on which the responsible party’s Statement is based. However, in a direct engagement, where the responsible party does not explicitly evaluate the controls for the purposes of the engagement or provide a Statementon the outcome of that evaluation,if there is no description,the assurance practitioner shall take a more active role in identifying, selectingor developingspecific control objectivesagainst which to evaluate the design of controls.
The assurance practitioner shall identify the controls relevant to the achievement of eachspecific control objective, which areeither,identified in the terms of the engagement,or identified, selected or developed in planningthe engagement under paragraph.
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The assurance practitioner shall identifya controlor combination of controlsas material if it is fundamental tothe achievement of acontrol objective, included inthe scope of the engagement, by mitigating the risks that threaten achievement of that objective.During the engagement the assurance practitioner shall reassess the materialityof the controlsif matters come to their attention whichindicate that the basis on which the materiality of those controls was determinedhas changed.
The assurance practitioner shall also consider materialitywhen evaluating the effect ofaccumulated deficiencies in the design,and if applicable,misstatements in the description of the system, deficiencies in implementationor deviations in operating effectiveness of controls as designed. Material deficiencies, misstatements and deviations arethose which could reasonably be expected to influence relevant decisions of the intended users.
The assurance practitioner shall obtain an understanding of the system, including controls, or the control components within the system that are included in the scope of the engagement, and other engagement circumstances, and on the basis of that understanding, the assurance practitioner shall.
for a direct engagement, consider whether the identification, selection or development of control objectives is appropriate, and/or select or develop further suitable control objectives;and for both attestation and direct engagements:
(i)identify the risks that threatenachievement of the control objectives;
(ii)identify the controls designed to mitigate those risks;
(iii)identify andassess the risk
a.the controls are not suitably designed to achieve the control objectives identified;
b.the description (ifincluded inthe scope of the engagement) does not fairly present the system as designed;
c.the controls were not implemented (if included inthe scope of the engagement) as designed; and
d.the controls were not operating effectively (if included inthe scope of the engagement) throughout the period;