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24 Apr. 2017

AUASB invites comments on IAASB Exposure Draft ISA 540

The AUASB invites comments on Proposed International Standard on Auditing ISA 540 Auditing Accounting Estimates and Related Disclosures.

Significant changes in how auditors evaluate accounting estimates and related disclosures have been proposed by the International Auditing and Assurance Standards Board (IAASB). The changes will require auditors to sharpen their focus on risks of material misstatements arising from accounting estimates, and to address those risks with more granular audit requirements.

“Accounting estimates are used in many financial statements – often they are complex, and require judgement or have estimation uncertainty. It is especially important that auditors are required to design and perform procedures to ensure estimates’ reliability,” said IAASB Chairman Prof Arnold Schilder. “The proposed standard will bring significant changes to many audits, but particularly to audits of financial institutions, such as banks and insurers, given the recent shift to accounting for expected credit losses.”

The proposed standard:

  • enhances requirements for risk assessment procedures to include specific factors related to accounting estimates, namely complexity, judgment, and estimation uncertainty
  • sets a more detailed expectation for the auditor’s response to identified risks, including augmenting the auditor’s application of professional scepticism
  • is scalable regardless of the size or sector of the business or audit firm.

The AUASB is conducting the following roundtable discussions in relation to ISA 540 ED:

  • Brisbane – 8 May 2017
  • Melbourne – 19 May 2017
  • Sydney – 5 June 2017. 

Further information on these sessions is available via the AUASB website.

AUASB requests all comments addressed to it on the IAASB’s ED by no later than 7 July 2017, in order to consider them in formulating its submission to the IAASB.  The IAASB comment period closes on 1 August 2017.

Please forward any comments to