Course Overview

Accounting estimates play a critical role in financial reporting and often pose challenges for auditors due to their inherent uncertainty. The revised ISA 540 introduces new requirements
that emphasize the importance of a detailed understanding of the entity, its environment, and controls over estimates. The revised standard also increases the auditor’s work effort, requiring more robust documentation and evaluation procedures.

Understanding ISA 540 is essential to conducting high-quality audits. Auditors need to ensure that accounting estimates are reasonable, free of management bias, and that potential risks of material misstatements are addressed effectively.

This course offers practical insights into the revised ISA 540, guiding participants on how to audit accounting estimates efficiently while meeting the latest requirements.

Course objective

This course combines theoretical learning with practical case studies, giving participants the opportunity to apply audit procedures on accounting estimates. Hands-on exercises will enhance participants’ understanding of the new requirements and help them develop audit
strategies aligned with ISA 540.

By the end of this course, participants will have the skills and confidence to effectively audit
accounting estimates, ensuring compliance with the latest ISA standards and delivering high-quality audit results

Course Content

Understanding the Entity and Identifying Estimates

• How to obtain an understanding of the entity and its environment to identify accounting estimates.
• Identifying significant estimates relevant to the financial statements.

Understanding and Documenting Controls over Estimates

• How to obtain and document an understanding of internal controls related to estimates.
• Assessing whether the controls in place are designed and implemented effectively.

Documenting Methods, Assumptions, and Data Sources

• Evaluating the methods, assumptions, and sources of data used in calculating estimates.
• Identifying and documenting the relevance and reliability of the data inputs.

Identifying Estimation Uncertainty and Risks of Material Misstatement

• Assessing estimation uncertainty and identifying areas with a high risk of material misstatement.
• Understanding the difference between inherent risk and control risk for estimates.
• Retrospective review of prior estimates to evaluate their accuracy.
• Identifying potential management bias in the preparation of estimates.

Performing Audit Procedures on Estimates

• Reviewing outcomes after year-end and up to the date of the auditor’s report.
• Testing management assumptions for reasonableness and consistency.
• Calculating an Auditor’s Point Estimate or Range
• Developing an auditor’s point estimate or range to assess the reasonableness of management’s estimate.
• Evaluating the difference between the auditor’s estimate and management’s estimate and determining whether it is reasonable.

Who Should Attend

• Auditors
• Audit Managers
• Audit Partners
• Engagement Quality Control Reviewers
• Third, Fourth, and Fifth-Year SAICA Trainees