Proposed International Standard on Auditing 540 (Revised)

Joint submission by Chartered Accountants Australia and New Zealand and the Association of Chartered Certified Accountants, responding to an exposure draft issued for public consultation by the International Auditing and Assurance Standards Board (IAASB) on: Proposed International Standard on Auditing 540 (Revised), Auditing Accounting Estimates and Related Disclosures

CA ANZ and ACCA appreciate the opportunity to comment on ED-540. In responding to the proposals and undertaking outreach with our members, we have considered whether ED-540 addresses the concerns that underlie the call for a revision of extant ISA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures (“ISA 540”). We understand the key concerns to be:

  • regulator findings that indicate that there is insufficient/inappropriate work effort by auditors in relation to auditing accounting estimates (during both the risk assessment phase and the gathering of audit evidence)
  • lack of professional scepticism in challenging management’s assumptions and biases in the auditing of accounting estimates 
  • lack of sufficient work effort and attention given by auditors to the disclosures in relation to accounting estimates, particularly in relation to the increasing complexity of estimates contained within accounting standards.

Our detailed comments can be found in the attached document.