ASA 540 Auditing accounting estimates and related disclosures has been significantly revised to keep pace with developments in financial reporting. In particular, the use of more forward-looking information expected credit loss basis for financial instruments, in revenue recognition and insurance contracts. These innovations have led to an increase in the volume and complexity of accounting judgements and related disclosures. All require an auditor’s response. The session will:
- Describe the key concepts in ASA 540
- Identify significant changes resulting from the revision
- Discuss the higher benchmark for assessing the adequacy of disclosures
- Describe the effect on audit planning and audit evidence, and
- Identify what we need to tell governance.