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Auditing Standard ASA 540 Auditing Accounting Estimates and Related Disclosures
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- The auditor shall include in the audit documentation:[30] (Ref: Para. A149–A152)
- Key elements of the auditor’s understanding of the entity and its environment, including the entity’s internal control related to the entity’s accounting estimates;
- The linkage of the auditor’s further audit procedures with the assessed risks of material misstatement at the assertion level,[31] taking into account the reasons (whether related to inherent risk or control risk) given to the assessment of those risks;
- The auditor’s response(s) when management has not taken appropriate steps to understand and address estimation uncertainty;
- Indicators of possible management bias related to accounting estimates, if any, and the auditor’s evaluation of the implications for the audit, as required by paragraph 32; and
- Significant judgements relating to the auditor’s determination of whether the accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework, or are misstated.
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