What is an accounting estimate? Considerations for auditors
When performing audits of financial statements, it is important that you identify all relevant accounting estimates to which the requirements in ISA 540 (Revised) Auditing accounting estimates and related disclosures apply. This Audit and Assurance guide provides information and guidance on how to spot accounting estimates and not overlook the more obvious ones in your audit.
A set of historical financial statements includes many amounts that cannot be calculated with certainty. This may be because the measurement or valuation of these amounts is dependent on the outcome of future events. It could also be that the information needed to determine the amount cannot be accumulated in a timely or cost effective manner.
ISA 540 (Revised) defines an accounting estimate as: “A monetary amount for which the measurement, in accordance with the requirements of the applicable financial reporting framework, is subject to estimation uncertainty”, where estimation uncertainty is defined as “susceptibility to an inherent lack of precision in measurement”.
Continue reading
This content is not freely available. To access 'What is an accounting estimate? Considerations for auditors' you need to be one of the following:
-
ACA student
-
This content is available to ACA students. If you want to start the ACA qualification there are several routes you can take
-
Audit and Assurance Faculty
-
Stay ahead of the curve with our expert guidance, trusted technical resources and practical insights.
-
Business and Finance Professional
-
An internationally recognised designation and professional status from the ICAEW.
-
ICAEW member
-
Gain access to world-leading information resources, guidance and local networks. 98% of the best global brands rely on ICAEW chartered accountants.