Accounting estimates and related disclosures can be tricky to audit and implementing the new and enhanced requirements in the revised International Standard on Auditing (ISA) 540 can be challenging. To help firms as they adopt and adapt to the revised standard, the faculty has collected a range of resources and made them accessible from a new dedicated hub page. Auditing Accounting Estimates.

Here you will find links to numerous ICAEW articles, guides, helpsheets and webinars, plus links to resources from the International Auditing and Assurance Standards Board.

Managing the transition

Auditors are adapting to major changes, new concepts and enhanced requirements. Firms are getting to grips with updated audit methodologies, procedures, standard forms and more. Audit teams are learning what the changes to ISA 540 (Revised) mean and why they are important. Careful thinking, planning, training and guidance all contribute to effective implementation.

The new hub guides the auditor through some of the topics and questions that will be front of mind for many.

• What are the key changes introduced in the revised standard and what do they mean?
• How do you spot accounting estimates and not miss the ones that are most commonly overlooked during audits?
• How are accounting estimates picked up in risk assessments?
• Are all estimates equal?
• What are inherent risk factors and how might they influence your audit of accounting estimates?
• How do you identify whether any risks of material misstatement identified give rise to significant risks?
• How does the auditor respond to assessed risk?

Tricky areas are addressed in articles on, for example:

• how to demonstrate that the auditor has maintained professional scepticism throughout the audit;
• understanding the concept of the spectrum of inherent risk and how this can be applied; and
• understanding what needs to be documented on the audit file and when.

Practical illustrations

Valuable recent additions to the resource hub include a series of four webcasts (recorded during January 2022). They are designed to support audit firms in auditing accounting estimates under ISA 540 (Revised), by using practical illustrations to consider key issues in common audit areas.

Each faculty webcast is presented by a different technical expert. They are:

• Auditing accounting estimates – depreciation and fixed assets, presented by Matt Howells, Partner and Head of the National Assurance Technical Group at Smith and Williamson, and complemented by a recent ICAEW Insights article, What to remember when auditing depreciation;
• Auditing accounting estimates – identifying specific risks, presented by Sara Ashton, Managing Director, Technical Audit Professional Standards at Grant Thornton;
• Auditing accounting estimates – property valuations, presented by John Selwood, freelance lecturer and writer and member of the faculty’s Technical and Practical Auditing Committee; and
• Auditing accounting estimates – provisions, presented by Andrew Paul, who at the time was Technical Consultant and Paperless Assignment Specialist and Team Lead – Audit and Assurance and Compliance Lecturing at Mercia Group, and recently joined Baker Tilly International.

Audit and Assurance Faculty Technical Manager Emma Cross, who introduces the first two webcasts, says: “Through practical examples of both common and tricky audit areas, the webcasts offer useful reminders to help firms navigate some of the key changes, new concepts and enhanced requirements of the revised standard.”