Ensuring you’re aware of the main changes to ISA 540
The revised ISA 540 applies to all accounting estimates. Auditors need to be aware of the main changes and ensure that documentation is adequate, says Miriam Hanley of Menzies. She looks at enhancements, practical steps and actions to take, as well as some top tips.
There have always been challenges around the audit of accounting estimates and they seem unlikely to diminish any time soon. Some estimates are difficult to audit; their importance to investors and other stakeholders has increased in recent years, as changes to financial reporting standards have led to more accounting estimates in financial statements; and there has been a major revision to the standard ISA 540 Auditing Accounting Estimates and Related Disclosures for periods commencing on or after 15 December 2019.
The revised ISA 540 includes several enhancements and is significantly longer than the current version, but what are the main changes to be aware of?