New AUASB Frequently Asked Questions (FAQs) on auditing accounting estimates and related disclosures in response to COVID-19 event

Tuesday, May 19, 2020

The COVID-19 pandemic may impact the work of auditors in relation to auditing accounting estimates and related disclosures. Uncertainty and unpredictability may create risks of material misstatement that are new, or intensified, in the circumstances.

In these uncertain times, the auditor may find a need for greater focus on:
• changes to regulatory factors that may affect accounting estimates
• the use of management’s and auditor’s experts
• the effect of changing inherent risk factors, in particular estimation uncertainty and subjectivity
• whether management’s assumptions are appropriate in the circumstances
• whether management’s disclosures are reasonable in the circumstances
• sufficiency and appropriateness of audit documentation

With this in mind, the staff of the AUASB have prepared a series of Frequently Asked Questions (FAQs) on these and other aspects of auditing accounting estimates and disclosures.  The FAQs reference the revised ASA 540 Auditing Accounting Estimates and Related Disclosures which establishes robust requirements and provides comprehensive application material which is expected to greatly assist auditors in auditing accounting estimates.   The FAQs are written in a style where auditors can source individual FAQs, if they need guidance on that specific question, and are suitable for reference by auditors whether or not they have adopted the recently revised ASA 540.

The FAQs can be accessed from the AUASB Website here under the “Auditing Accounting Estimates and Related Disclosures” category.