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Auditing estimates: ISA 540

Applicable standards: ISA 540 Auditing accounting estimates, including fair value accounting estimates, and related disclosures and ISA (UK) 540 (Revised June 2016) Auditing accounting estimates, including fair value accounting estimates, and related disclosures.

International Standard on Auditing (ISA) 540, Auditing accounting estimates, including fair value accounting estimates, and related disclosures(in the UK, ISA (UK) 540 (Revised June 2016), Auditing accounting estimates, including fair value accounting estimates, and related disclosures) deals with auditors’ responsibilities in relation to accounting estimates. 

It expands on how relevant ISAs are applied to the audit of accounting estimates. Such standards include: ISA 315 (Revised), Identifying and assessing risks of material misstatement through understanding the entity and its environment (ISA 315), and ISA 330, The auditor’s responses to assessed risks (ISA 330), amongst others.