|| The International Federation of Accountants (IFAC) today released a new resource, Auditing Accounting Estimates: ISA 540 (Revised) Implementation Tool. It will help auditors implement the International Auditing and Assurance Standards Board’s International Standard on Auditing 540 (Revised), Auditing Accounting Estimates and Related Disclosures by providing an overview of steps practitioners could take and related considerations.
For entities of all types and sizes, management has to make accounting estimates, which have estimation uncertainty and may also be complex. Making these estimates involves selecting and applying a method using assumptions and data, which requires judgment. The nature, timing and extent of the audit procedures required will vary in relation to the estimation uncertainty and the assessment of the related risks of material misstatement.
This implementation tool contains “what”, “why” and “how” suggestions. These are not all-encompassing and more or different considerations may apply depending on the circumstances of the engagement. The implementation tool also works in conjunction with the IAASB’s previously published ISA 540 (Revised) flowcharts showing the requirements flow. The choice of specific procedures an auditor decides to perform to meet the requirements of ISA 540 (Revised) and other relevant ISAs is a matter of professional judgement. This implementation tool does not replace the need to read ISA 540 (Revised), including its application and other explanatory material.
The publication is based on the Chartered Professional Accountants of Canada (CPA Canada) Implementation Tool and supports efforts to improve audit quality globally and, more broadly, international standards’ adoption and implementation. Additional guidance and resources are available on the dedicated Supporting International Standards section of the IFAC Knowledge Gateway.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.