Auditing Standard ASA 2021-5 Amendments to Australian Auditing Standards
Amendments to ASA 540Amendments to ASA 540
Start here
Get a plain-English read of Amendments to ASA 540
Turn the raw legal text into a practical explanation grounded in Auditing Standard ASA 2021-5 Amendments to Australian Auditing Standards.
Amendments to ASA 540
- Existing paragraph 4 is amended to read as follows:
This Auditing Standard requires a separate assessment of inherent risk for identified risks of material misstatement at the assertion level.5 In the context of ASA 540 (Revised), and depending on the nature of a particular accounting estimate, the susceptibility of an assertion to a misstatement that could be material may be subject to or affected by estimation uncertainty, complexity, subjectivity or other inherent risk factors, and the interrelationship among them. As explained in ASA 200,6 inherent risk is higher for some assertions and related classes of transactions, account balances and disclosures than for others. Accordingly, the assessment of inherent risk depends on the degree to which the inherent risk factors affect the likelihood or magnitude of misstatement, and varies on a scale that is referred to in this Auditing Standard as the spectrum of inherent risk. (Ref: Para. A8–A9, A65–A66, Appendix 1)