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13 Dec. 2019

AUASB Bulletin on ASA 540 Auditing Accounting Estimates and Related Disclosures

In December 2018 the Auditing and Assurance Standards Board (AUASB) issued the revised ASA 540 Auditing Accounting Estimates and Related Disclosures (ASA 540), dealing with the auditor’s responsibilities relating to accounting estimates, including fair value estimates and related disclosures in an audit of a financial report.  Specifically, the revised standard adopts a risk-based approach to auditing accounting estimates, emphasises the importance of professional scepticism by the auditor, ensuring that appropriate attention is paid to indicators of possible management bias and their audit implications.

This AUASB Bulletin describes the key changes and implications arising from ASA 540 for not only auditors, but also all parties involved in the financial reporting supply chain (i.e. preparers, those charged with governance, etc). Additionally the Bulletin includes links to other materials the AUASB and International Auditing and Assurance Standards Board have developed and made available to help auditors navigate and apply the revised standard.

The revisions to ASA 540 will ensure continuous improvement in audit quality and transparency. However, the revised standard is more complex and detailed than the extant standard it is replacing, meaning it is more challenging for auditors to apply, and there may be an uplift in auditors’ time and effort in this complex and judgemental area of the audit. It is essential that all those in the financial reporting supply chain are informed and prepared to address these new requirements.

Feedback and queries on this topic are welcome and should be directed to enquiries@auasb.gov.au or by telephone +61 3 8080 7400.