ISA 540 (Revised) Implementation: Illustrative Examples for Auditing Simple and Complex Accounting Estimates
May 29, 2020 | Guidance & Support Tools
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The International Standard on Auditing (ISA) 540 (Revised) Implementation Working Group has prepared illustrative examples for auditing simple and complex accounting estimates. The attached examples are designed to illustrate how an auditor could address certain requirements of ISA 540 (Revised), and have been developed to assist the auditor in understanding how ISA 540 (Revised) may be applied to:
- Simple Accounting Estimate – Provision on Inventory Impairment
- Complex Accounting Estimate – Provision on Property, Plant and Equipment Impairment
The examples illustrate accounting estimates with varying characteristics and degrees of complexity. Each example illustrates a selection of requirements from ISA 540 (Revised). Not all requirements are addressed in each example, nor do they cover all parts of those requirements that have been selected. The requirements selected across each example vary to illustrate different aspects of ISA 540 (Revised) and to focus on those requirements that are most relevant to the example.
These examples are intended to be read together with ISA 540 (Revised). This will demonstrate how an auditor’s work effort, to comply with the requirements of ISA 540 (Revised), may be scaled down and scaled up when auditing simple and complex accounting estimates.
These examples do not constitute an authoritative pronouncement of the International Auditing and Assurance Standards Board (IAASB), nor do they amend, extend or override the ISAs or other of the IAASB’s International Standards. It is not meant to be exhaustive and reading these examples is not a substitute for reading the ISAs.
Copyright © 2023 The International Federation of Accountants (IFAC). All rights reserved.
- 2018 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements
- 2021 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements
- Proposed International Standard on Auditing 500 (Revised), Audit Evidence, and Proposed Conforming and Consequential Amendments to Other ISAs
- Proposed Part 10, Audits of Group Financial Statements of the Proposed ISA for Audits of Financial Statements of Less Complex Entities
- Quality Management and Group Audits: Highlighting Certain Aspects of Interaction Between ISA 220 (Revised) and ISA 600
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