Amendments to ASA 540Amendments to ASA 540

Amendments to ASA 540

1. Existing paragraph A57 is amended to read as follows:

A retrospective review of management judgements and assumptions related to significant accounting estimates is required by ASA 240. As a practical matter, the auditor’s review of previous accounting estimates as a risk assessment procedure in accordance with this Auditing Standard may be carried out in conjunction with the review required by ASA 240.

1. Existing footnote 41 in paragraph A57 is amended to read as follows:

See ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report, paragraph 33(b)(ii)28.

1. Existing paragraph A136 is amended to read as follows:

In addition, in applying ASA 240, the auditor is required to evaluate whether management’s judgements and decisions in making the accounting estimates included in the financial report, even if they are individually reasonable, are indicateindicators aof possible management bias that may represent a material misstatement due to fraud.[62] Fraudulent financial reporting is often accomplished through intentional misstatement of accounting estimates, which may include intentionally understating or overstating accounting estimates. Indicators of possible management bias that may also be a fraud risk factor,[62] may cause the auditor to reassess whether the auditor’s risk assessments, in particular the assessment of risks of material misstatement due to fraud risks, and related responses remain appropriate.