Implementation support for ISA (NZ) 540 (Revised)

For entities of all types and sizes, management has to make accounting estimates, which have estimation uncertainty and may also be complex. Making these estimates involves selecting and applying a method using assumptions and data, which requires judgment. The nature, timing and extent of the audit procedures will vary in relation to the estimation uncertainty and the assessment of the related risks of material misstatement.  

To assist auditors in implementing the International Standard on Auditing (New Zealand) 540 (Revised), Auditing Accounting Estimates and Related Disclosures when auditing accounting estimates, the International Federation of Accountants (IFAC) has released a new resource, Auditing Accounting Estimates: ISA 540 (Revised) Implementation Tool.

The tool provides an overview of steps practitioners could take and related considerations. It also contains “what”, “why” and “how” suggestions. These are not all-encompassing and more or different considerations may apply depending on the circumstances of the engagement. 

The implementation tool also works in conjunction with the IAASB’s previously published ISA 540 (Revised) flowcharts showing the requirements flow. The choice of specific procedures an auditor decides to perform to meet the requirements of ISA 540 (Revised) and other relevant ISAs is a matter of professional judgement.

This implementation tool does not replace the need to read ISA 540 (Revised), including its application and other explanatory material.


IAASB Implementation Tool


IAASB Flow Charts

ISA 540 (Revised) flowcharts


IAASB Illustrative Examples for auditing simple and complex accounting estimates

The examples illustrate accounting estimates with varying characteristics and degrees of complexity. Each example illustrates a selection of requirements from ISA 540 (Revised).


IAASB Considerations for Management When Determining Accounting Estimates and Related Disclosures

The purpose of this Briefing is to make chief financial officers and other senior management responsible for financial statement preparation, as well as staff directly involved in determining accounting estimates aware of matters to consider in preparing for the auditor’s requests pertaining to ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures.