Singapore Standard on Auditing (SSA) 540 deals with the audit of accounting estimates and related disclosures. The proposed revised standard is based on the International Standard on Auditing (ISA) 540 (Revised), Auditing Accounting Estimates and Related Disclosures issued by the International Auditing and Assurance Standards Board (IAASB) and is effective for financial statement audits for periods beginning on or after 15 December 2019.
The changes include:
An enhanced risk assessment that requires auditors to consider complexity, subjectivity and other inherent risk factors in addition to estimation uncertainty. This will drive auditors to think more deeply about the risks inherent to accounting estimates;
A closer link between the enhanced risk assessment and the methods, data and assumptions used in making accounting estimates, including the use of complex models;
Specific material to show how the standard is scalable to all types of accounting estimates; and
Emphasis on the importance of applying appropriate professional scepticism when auditing accounting estimates to foster a more independent and challenging sceptical mindset in auditors.
Arising from SSA 540 (Revised), conforming amendments are made to other relevant SSAs:
SSA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Singapore Standards on Auditing
SSA 230, Audit Documentation
SSA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements Accounting Estimates
SSA 260 (Revised), Communication with Those Charged with Governance
SSA 500, Audit Evidence
SSA 580, Written Representations
SSA 700 (Revised), Forming an Opinion and Reporting on Financial Statements
SSA 701, Communicating Key Audit Matters in the Independent Auditor’s Report
ISCA would like to seek views from key stakeholders on the above proposal.
Please click here for ED SSA 540 (Revised), Auditing Accounting Estimates and Related Disclosures and Conforming and Consequential Amendments to Other Singapore Standards Arising from SSA 540 (Revised).