Wiley Practitioner's Guide to GAAS 2022

21AU-C 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures

• Technical Alert
• Scope
• Definitions of Terms
• Objective of AU-C Section 540
• Overview
• Requirements
  • Risk Assessment Procedures

TECHNICAL ALERT

In July 2020, the ASB issued SAS 143, Auditing Accounting Estimates and Related Disclosures. Among other things, the SAS:

• Addresses the auditor's responsibilities relating to accounting estimates, including fair value and related disclosures
• Enables auditors to address complexities of new accounting standards that include estimates
• Requires a separate assessment of inherent risk and control risk at the assertion level
• Addresses the exercise of professional skepticism when auditing accounting estimates

The SAS is effective for audits of financial statements for periods ending after December 15, 2023. Therefore, the changes are not incorporated in this edition.

SCOPE

AU-C 540 offers guidance on the auditor's responsibilities related to estimates. It provides details on how to apply AU-C 315 and 330 and other relevant sections to auditing estimates, including fair value estimates and disclosures. Guidance is included on handling individual accounting estimates and indicators of management bias. (AU-C 540.01)

DEFINITIONS OF TERMS

Source: AU-C 540.07. For definitions related to this standard, see Appendix A, “Definitions of Terms”: Accounting estimate, Auditor's point estimate or auditor's range, Estimation uncertainty, Management ...