Auditing accounting estimates has never been an easy task. Estimates are difficult to measure and because it often involves management’s judgment they pose huge challenges for auditors.

The new ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures, introduces a number of changes that auditors will need to understand and implement. The significance of the changes shouldn’t be underestimated.

While the standard has been written to be scalable to estimates with low risk, auditors are going to need to understand the requirements properly before they are able to make a judgment about what work they need to do.

This session will focus on the amount of work auditors need to do to tackle the requirements in the revised standard, including appropriately capturing the changes into audit methodologies and guiding the work of auditors in this area.

The session will focus on three key areas – risk assessment, professional skepticism and documentation.

Course Content:
• Requirement to perform separate inherent risk and control risk assessments at the
assertion level
• New concept of spectrum of inherent risk
• Further audit procedures to respond to the risks of material misstatement
• Key drivers of scalability
• Performing a retrospective review
• The concept of presumed fraud risk
• When should the auditor address controls over estimates
• How to demonstrate that professional skepticism has been applied
• The new stand back requirement to be performed
• The new enhanced documentation requirements