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ASA 540 tells auditors how to evaluate accounting estimates and related disclosures in financial reports—recognising these are judgement-heavy, inherently uncertain, and a common source of material misstatement.
It applies to audits under the Corporations Act and similar engagements, requiring a scaled approach so auditors understand how estimates are made, assess estimation risk and bias, and obtain sufficient appropriate evidence that disclosures fairly reflect uncertainty.
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Direct links to the current provisions in Auditing Standard ASA 540 Auditing Accounting Estimates and Related Disclosures.
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
| Auditing and Assurance Standards BoardLevel 20, 500 Collins StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |
|---|
© 2022 Commonwealth of Australia. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use subject to the inclusion of an acknowledgment of the source as being the Australian Auditing and Assurance Standards Board (AUASB).
Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.
Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833-4393
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Paragraphs
Application......................................................Aus 0.1-Aus 0.2
Operative Date.........................................................Aus 0.3
Introduction
Scope of this Auditing Standard..................................................1
Nature of Accounting Estimates.................................................2-3
Key Concepts of this Auditing Standard...........................................4-9
Effective Date..............................................................10
Objective.................................................................11
Definitions................................................................12
Requirements
Risk Assessment Procedures and Related Activities.................................13-15
Identifying and Assessing the Risks of Material Misstatement.........................16-17
Responses to the Assessed Risks of Material Misstatement............................18-30
Disclosures Related to Accounting Estimates........................................31
Indicators of Possible Management Bias...........................................32
Overall Evaluation Based on Audit Procedures Performed............................33-36
Written Representations.......................................................37
Communication with Those Charged With Governance, Management, or Other Relevant Parties...38
Documentation..............................................................39
Application and Other Explanatory Material
Nature of Accounting Estimates..............................................A1-A7
Key Concepts of this Auditing Standard........................................A8-A13
Definitions............................................................A14-A18
Risk Assessment Procedures and Related Activities..............................A19-A63
Identifying and Assessing the Risks of Material Misstatement.......................A64-A80
Responses to the Assessed Risks of Material Misstatement........................A81-A132
Indicators of Possible Management Bias.....................................A133-A136
Overall Evaluation Based on Audit Procedures Performed........................A137-A144
Written Representations.....................................................A145
Communication with Those Charged With Governance, Management or Other Relevant PartiesA146-A148
Documentation.......................................................A149-A152
Appendix 1: Inherent Risk Factors
Appendix 2: Communications with Those Charged with Governance
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
| Auditing and Assurance Standards BoardLevel 20, 500 Collins StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |
|---|
© 2022 Commonwealth of Australia. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use subject to the inclusion of an acknowledgment of the source as being the Australian Auditing and Assurance Standards Board (AUASB).
Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.
Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833-4393
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Paragraphs
Application......................................................Aus 0.1-Aus 0.2
Operative Date.........................................................Aus 0.3
Introduction
Scope of this Auditing Standard..................................................1
Nature of Accounting Estimates.................................................2-3
Key Concepts of this Auditing Standard...........................................4-9
Effective Date..............................................................10
Objective.................................................................11
Definitions................................................................12
Requirements
Risk Assessment Procedures and Related Activities.................................13-15
Identifying and Assessing the Risks of Material Misstatement.........................16-17
Responses to the Assessed Risks of Material Misstatement............................18-30
Disclosures Related to Accounting Estimates........................................31
Indicators of Possible Management Bias...........................................32
Overall Evaluation Based on Audit Procedures Performed............................33-36
Written Representations.......................................................37
Communication with Those Charged With Governance, Management, or Other Relevant Parties...38
Documentation..............................................................39
Application and Other Explanatory Material
Nature of Accounting Estimates..............................................A1-A7
Key Concepts of this Auditing Standard........................................A8-A13
Definitions............................................................A14-A18
Risk Assessment Procedures and Related Activities..............................A19-A63
Identifying and Assessing the Risks of Material Misstatement.......................A64-A80
Responses to the Assessed Risks of Material Misstatement........................A81-A132
Indicators of Possible Management Bias.....................................A133-A136
Overall Evaluation Based on Audit Procedures Performed........................A137-A144
Written Representations.....................................................A145
Communication with Those Charged With Governance, Management or Other Relevant PartiesA146-A148
Documentation.......................................................A149-A152
Appendix 1: Inherent Risk Factors
Appendix 2: Communications with Those Charged with Governance
This compilation takes into account amendments made up to and including 5 November 2021 and was prepared on 31 March 2022 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 540 (December 2018) as amended by other Auditing Standards which are listed in the Table below.
| Standard | Date made | Operative Date |
|---|---|---|
| ASA 540 [A] | 5 December 2018 | Financial reporting periods commencing on or after 15 December 2019[*] |
| ASA 2020-1 [B] | 3 March 2020 | Financial reporting periods commencing on or after 15 December 2021[#] |
| ASA 2021-5 [C] | 5 November 2021 | Financial reporting periods commencing on or after 15 December 2021 |
| ASA 2021-1 [D] | 10 March 2021 | Financial reporting periods commencing on or after 15 December 2022 |
[A] Federal Register of Legislation – registration number F2019L00014, 3 January 2019
[B] Federal Register of Legislation – registration number F2020L00252, 13 March 2020
[C] Federal Register of Legislation – registration number F2021L01525, 8 November 2021
[D] Federal Register of Legislation – registration number F2021L00403, 1 April 2021
| Paragraph affected | How affected | By … [paragraph] |
|---|---|---|
| 4 | Amended | ASA 2020-1 [137] |
| 4Footnote 5 | Addition | ASA 2020-1 [137 and 138] |
| 5 | Amended | ASA 2020-1 [139] |
| 6 | Amended | ASA 2020-1 [140] |
| 6Footnote 6 | Deleted | ASA 2020-1 [140] |
| 8 | Amended | ASA 2020-1 [141] |
| 13 and Footnote 9 | Amended | ASA 2020-1 [142] |
| 16 and Footnote 11 | Amended | ASA 2020-1 [143] |
| 17 and Footnotes 12 and 13 | Amended | ASA 2020-1 [144] |
| 17Footnote 14 | Addition | ASA 2020-1 [144] |
| 19 | Amended | ASA 2020-1 [145] |
| A8 | Amended | ASA 2020-1 [146] |
| A8Footnote 33 | Addition | ASA 2020-1 [146] |
| A9 | Amended | ASA 2020-1 [147] |
| A9Footnote 34 | Addition | ASA 2020-1 [147] |
| A10 | Amended | ASA 2020-1 [148] |
| Sub-heading under section heading “Risk Assessment Procedures and Related Activities” | Amended | ASA 2020-1 [149] |
| A19 | Amended | ASA 2020-1 [150] |
| A20 | Amended | ASA 2020-1 [151] |
| Sub-heading under section heading “The Entity and Its Environment” | Amended | ASA 2020-1 [152] |
| A24 | Amended | ASA 2020-1 [153] |
| Sub-heading after paragraph A27 | Amended | ASA 2020-1 [154] |
| A28 and Footnote 36 | Amended | ASA 2020-1 [155] |
| A32 | Amended | ASA 2020-1 [156] |
| A34 | Amended | ASA 2020-1 [157] |
| A35 and Footnote 39 | Amended | ASA 2020-1 [158] |
| A39 | Amended | ASA 2020-1 [159] |
| A44 | Amended | ASA 2020-1 [160] |
| Sub-heading before paragraph A50 | Amended | ASA 2020-1 [161] |
| A50 | Amended | ASA 2020-1 [162] |
| A51 | Amended | ASA 2020-1 [163] |
| A52 | Amended | ASA 2020-1 [164] |
| A53 and Footnote 41 | Amended | ASA 2020-1 [165] |
| A54 | Amended | ASA 2020-1 [166] |
| A59 | Amended | ASA 2020-1 [167] |
| A60 | Amended | ASA 2020-1 [168] |
| A65 | Amended | ASA 2020-1 [169] |
| A65Footnote 46 | Addition | ASA 2020-1 [169] |
| A66 | Amended | ASA 2020-1 [170] |
| A66Footnote 48 | Addition | ASA 2020-1 [170] |
| A68 | Amended | ASA 2020-1 [171] |
| A70 and Footnote 49 | Amended | ASA 2020-1 [172] |
| A79 | Amended | ASA 2020-1 [173] |
| Sub-heading before paragraph A85 | Amended | ASA 2020-1 [174] |
| A85 | Amended | ASA 2020-1 [175] |
| Renumbering of footnotes | Amended | ASA 2020-1 [176] |
| A104Footnote 56 | Amended | ASA 2020-1 [177] |
| A137Footnote 65 | Amended | ASA 2020-1 [178] |
| A149Footnote 72 | Amended | ASA 2020-1 [179] |
| 4 | Amended | ASA 2021-5 [22] |
| A61Footnote 39 | Amended | ASA 2021-1 [89] |
Auditing Standard ASA 540 Auditing Accounting Estimates and Related Disclosures (as amended to 5 November 2021) is set out in paragraphs Aus 0.1 to A152 and Appendices 1 to 2.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
This Auditing Standard conforms with International Standard on Auditing ISA 540 Auditing Accounting Estimates and Related Disclosures issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 540 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 540.
This compilation takes into account amendments made up to and including 5 November 2021 and was prepared on 31 March 2022 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 540 (December 2018) as amended by other Auditing Standards which are listed in the Table below.
| Standard | Date made | Operative Date |
|---|---|---|
| ASA 540 [A] | 5 December 2018 | Financial reporting periods commencing on or after 15 December 2019[*] |
| ASA 2020-1 [B] | 3 March 2020 | Financial reporting periods commencing on or after 15 December 2021[#] |
| ASA 2021-5 [C] | 5 November 2021 | Financial reporting periods commencing on or after 15 December 2021 |
| ASA 2021-1 [D] | 10 March 2021 | Financial reporting periods commencing on or after 15 December 2022 |
[A] Federal Register of Legislation – registration number F2019L00014, 3 January 2019
[B] Federal Register of Legislation – registration number F2020L00252, 13 March 2020
[C] Federal Register of Legislation – registration number F2021L01525, 8 November 2021
[D] Federal Register of Legislation – registration number F2021L00403, 1 April 2021
| Paragraph affected | How affected | By … [paragraph] |
|---|---|---|
| 4 | Amended | ASA 2020-1 [137] |
| 4Footnote 5 | Addition | ASA 2020-1 [137 and 138] |
| 5 | Amended | ASA 2020-1 [139] |
| 6 | Amended | ASA 2020-1 [140] |
| 6Footnote 6 | Deleted | ASA 2020-1 [140] |
| 8 | Amended | ASA 2020-1 [141] |
| 13 and Footnote 9 | Amended | ASA 2020-1 [142] |
| 16 and Footnote 11 | Amended | ASA 2020-1 [143] |
| 17 and Footnotes 12 and 13 | Amended | ASA 2020-1 [144] |
| 17Footnote 14 | Addition | ASA 2020-1 [144] |
| 19 | Amended | ASA 2020-1 [145] |
| A8 | Amended | ASA 2020-1 [146] |
| A8Footnote 33 | Addition | ASA 2020-1 [146] |
| A9 | Amended | ASA 2020-1 [147] |
| A9Footnote 34 | Addition | ASA 2020-1 [147] |
| A10 | Amended | ASA 2020-1 [148] |
| Sub-heading under section heading “Risk Assessment Procedures and Related Activities” | Amended | ASA 2020-1 [149] |
| A19 | Amended | ASA 2020-1 [150] |
| A20 | Amended | ASA 2020-1 [151] |
| Sub-heading under section heading “The Entity and Its Environment” | Amended | ASA 2020-1 [152] |
| A24 | Amended | ASA 2020-1 [153] |
| Sub-heading after paragraph A27 | Amended | ASA 2020-1 [154] |
| A28 and Footnote 36 | Amended | ASA 2020-1 [155] |
| A32 | Amended | ASA 2020-1 [156] |
| A34 | Amended | ASA 2020-1 [157] |
| A35 and Footnote 39 | Amended | ASA 2020-1 [158] |
| A39 | Amended | ASA 2020-1 [159] |
| A44 | Amended | ASA 2020-1 [160] |
| Sub-heading before paragraph A50 | Amended | ASA 2020-1 [161] |
| A50 | Amended | ASA 2020-1 [162] |
| A51 | Amended | ASA 2020-1 [163] |
| A52 | Amended | ASA 2020-1 [164] |
| A53 and Footnote 41 | Amended | ASA 2020-1 [165] |
| A54 | Amended | ASA 2020-1 [166] |
| A59 | Amended | ASA 2020-1 [167] |
| A60 | Amended | ASA 2020-1 [168] |
| A65 | Amended | ASA 2020-1 [169] |
| A65Footnote 46 | Addition | ASA 2020-1 [169] |
| A66 | Amended | ASA 2020-1 [170] |
| A66Footnote 48 | Addition | ASA 2020-1 [170] |
| A68 | Amended | ASA 2020-1 [171] |
| A70 and Footnote 49 | Amended | ASA 2020-1 [172] |
| A79 | Amended | ASA 2020-1 [173] |
| Sub-heading before paragraph A85 | Amended | ASA 2020-1 [174] |
| A85 | Amended | ASA 2020-1 [175] |
| Renumbering of footnotes | Amended | ASA 2020-1 [176] |
| A104Footnote 56 | Amended | ASA 2020-1 [177] |
| A137Footnote 65 | Amended | ASA 2020-1 [178] |
| A149Footnote 72 | Amended | ASA 2020-1 [179] |
| 4 | Amended | ASA 2021-5 [22] |
| A61Footnote 39 | Amended | ASA 2021-1 [89] |
Auditing Standard ASA 540 Auditing Accounting Estimates and Related Disclosures (as amended to 5 November 2021) is set out in paragraphs Aus 0.1 to A152 and Appendices 1 to 2.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
This Auditing Standard conforms with International Standard on Auditing ISA 540 Auditing Accounting Estimates and Related Disclosures issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 540 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 540.
Auditing Standard ASA 540 Auditing Accounting Estimates and Related Disclosures (as amended to 5 November 2021) is set out in paragraphs Aus 0.1 to A152 and Appendices 1 to 2.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
This Auditing Standard conforms with International Standard on Auditing ISA 540 Auditing Accounting Estimates and Related Disclosures issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
This Auditing Standard incorporates terminology and definitions used in Australia.
The equivalent requirements and related application and other explanatory material included in ISA 540 in respect of “relevant ethical requirements”, have been included in Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements. There is no international equivalent to ASA 102.
Compliance with this Auditing Standard enables compliance with ISA 540.
Sourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
| Auditing and Assurance Standards BoardLevel 20, 500 Collins StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |
|---|
© 2022 Commonwealth of Australia. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use subject to the inclusion of an acknowledgment of the source as being the Australian Auditing and Assurance Standards Board (AUASB).
Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.
Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to . Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833-4393
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Paragraphs
Application......................................................Aus 0.1-Aus 0.2
Operative Date.........................................................Aus 0.3
Introduction
Scope of this Auditing Standard..................................................1
Nature of Accounting Estimates.................................................2-3
Key Concepts of this Auditing Standard...........................................4-9
Effective Date..............................................................10
Objective.................................................................11
Definitions................................................................12
Requirements
Risk Assessment Procedures and Related Activities.................................13-15
Identifying and Assessing the Risks of Material Misstatement.........................16-17
Responses to the Assessed Risks of Material Misstatement............................18-30
Disclosures Related to Accounting Estimates........................................31
Indicators of Possible Management Bias...........................................32
Overall Evaluation Based on Audit Procedures Performed............................33-36
Written Representations.......................................................37
Communication with Those Charged With Governance, Management, or Other Relevant Parties...38
Documentation..............................................................39
Application and Other Explanatory Material
Nature of Accounting Estimates..............................................A1-A7
Key Concepts of this Auditing Standard........................................A8-A13
Definitions............................................................A14-A18
Risk Assessment Procedures and Related Activities..............................A19-A63
Identifying and Assessing the Risks of Material Misstatement.......................A64-A80
Responses to the Assessed Risks of Material Misstatement........................A81-A132
Indicators of Possible Management Bias.....................................A133-A136
Overall Evaluation Based on Audit Procedures Performed........................A137-A144
Written Representations.....................................................A145
Communication with Those Charged With Governance, Management or Other Relevant PartiesA146-A148
Documentation.......................................................A149-A152
Appendix 1: Inherent Risk Factors
Appendix 2: Communications with Those Charged with Governance
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
| Auditing and Assurance Standards BoardLevel 20, 500 Collins StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |
|---|
© 2022 Commonwealth of Australia. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use subject to the inclusion of an acknowledgment of the source as being the Australian Auditing and Assurance Standards Board (AUASB).
Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.
This Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.
All existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.
Further information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to enquiries@auasb.gov.au. Any decision to approve a request may also require the agreement of IFAC.
ISSN 1833-4393
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Paragraphs
Application......................................................Aus 0.1-Aus 0.2
Operative Date.........................................................Aus 0.3
Introduction
Scope of this Auditing Standard..................................................1
Nature of Accounting Estimates.................................................2-3
Key Concepts of this Auditing Standard...........................................4-9
Effective Date..............................................................10
Objective.................................................................11
Definitions................................................................12
Requirements
Risk Assessment Procedures and Related Activities.................................13-15
Identifying and Assessing the Risks of Material Misstatement.........................16-17
Responses to the Assessed Risks of Material Misstatement............................18-30
Disclosures Related to Accounting Estimates........................................31
Indicators of Possible Management Bias...........................................32
Overall Evaluation Based on Audit Procedures Performed............................33-36
Written Representations.......................................................37
Communication with Those Charged With Governance, Management, or Other Relevant Parties...38
Documentation..............................................................39
Application and Other Explanatory Material
Nature of Accounting Estimates..............................................A1-A7
Key Concepts of this Auditing Standard........................................A8-A13
Definitions............................................................A14-A18
Risk Assessment Procedures and Related Activities..............................A19-A63
Identifying and Assessing the Risks of Material Misstatement.......................A64-A80
Responses to the Assessed Risks of Material Misstatement........................A81-A132
Indicators of Possible Management Bias.....................................A133-A136
Overall Evaluation Based on Audit Procedures Performed........................A137-A144
Written Representations.....................................................A145
Communication with Those Charged With Governance, Management or Other Relevant PartiesA146-A148
Documentation.......................................................A149-A152
Appendix 1: Inherent Risk Factors
Appendix 2: Communications with Those Charged with Governance
This compilation takes into account amendments made up to and including 5 November 2021 and was prepared on 31 March 2022 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 540 (December 2018) as amended by other Auditing Standards which are listed in the Table below.
| Standard | Date made | Operative Date |
|---|---|---|
| ASA 540 [A] | 5 December 2018 | Financial reporting periods commencing on or after 15 December 2019[*] |
| ASA 2020-1 [B] | 3 March 2020 | Financial reporting periods commencing on or after 15 December 2021[#] |
| ASA 2021-5 [C] | 5 November 2021 | Financial reporting periods commencing on or after 15 December 2021 |
| ASA 2021-1 [D] | 10 March 2021 | Financial reporting periods commencing on or after 15 December 2022 |
[A] Federal Register of Legislation – registration number F2019L00014, 3 January 2019
[B] Federal Register of Legislation – registration number F2020L00252, 13 March 2020
[C] Federal Register of Legislation – registration number F2021L01525, 8 November 2021
[D] Federal Register of Legislation – registration number F2021L00403, 1 April 2021
| Paragraph affected | How affected | By … [paragraph] |
|---|---|---|
| 4 | Amended | ASA 2020-1 [137] |
| 4Footnote 5 | Addition | ASA 2020-1 [137 and 138] |
| 5 | Amended | ASA 2020-1 [139] |
| 6 | Amended | ASA 2020-1 [140] |
| 6Footnote 6 | Deleted | ASA 2020-1 [140] |
| 8 | Amended | ASA 2020-1 [141] |
| 13 and Footnote 9 | Amended | ASA 2020-1 [142] |
| 16 and Footnote 11 | Amended | ASA 2020-1 [143] |
| 17 and Footnotes 12 and 13 | Amended | ASA 2020-1 [144] |
| 17Footnote 14 | Addition | ASA 2020-1 [144] |
| 19 | Amended | ASA 2020-1 [145] |
| A8 | Amended | ASA 2020-1 [146] |
| A8Footnote 33 | Addition | ASA 2020-1 [146] |
| A9 | Amended | ASA 2020-1 [147] |
| A9Footnote 34 | Addition | ASA 2020-1 [147] |
| A10 | Amended | ASA 2020-1 [148] |
| Sub-heading under section heading “Risk Assessment Procedures and Related Activities” | Amended | ASA 2020-1 [149] |
| A19 | Amended | ASA 2020-1 [150] |
| A20 | Amended | ASA 2020-1 [151] |
| Sub-heading under section heading “The Entity and Its Environment” | Amended | ASA 2020-1 [152] |
| A24 | Amended | ASA 2020-1 [153] |
| Sub-heading after paragraph A27 | Amended | ASA 2020-1 [154] |
| A28 and Footnote 36 |
This is an opening excerpt, not the complete document.