Significant changes in how auditors evaluate accounting estimates and related disclosures have been proposed by the International Auditing and Assurance Standards Board (IAASB). The changes will require auditors to sharpen their focus on risks of material misstatements arising from accounting estimates, and to address those risks with more granular audit requirements.

“Accounting estimates are used in many financial statements—often they are complex, and require judgement or have estimation uncertainty. It is especially important that auditors are required to design and perform procedures to ensure estimates’ reliability,” said Prof. Arnold Schilder, IAASB Chairman. “The proposed standard will bring significant changes to many audits, but particularly to audits of financial institutions, such as banks and insurers, given the recent shift to accounting for expected credit losses.”

The proposed standard continues the evolution of audit to meet the challenges of an increasingly complex global economy. It was developed following extensive consultation with regulators and practitioners, including those who audit small, medium, and large businesses.

The proposed standard:

• enhances requirements for risk assessment procedures to include specific factors related to accounting estimates, namely complexity, judgment, and estimation uncertainty;
• sets a more detailed expectation for the auditor’s response to identified risks, including augmenting the auditor’s application of professional skepticism; and
• is scalable regardless of the size or sector of the business or audit firm.

International Standard on Auditing 540 (Revised), Auditing Accounting Estimates and Related Disclosures, is open for public comment until August 1, 2017. The IAASB invites all stakeholders to comment on the Exposure Draft via the IAASB website. 

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

The International Ethics Standards Board for Accountants^® (IESBA^®) today released an online survey seeking comments, views, and insights from all stakeholders to help shape its future strategic direction. The survey closes on July 18, 2017.

The survey seeks early input into the key issues the IESBA should address that might impact its Code of Ethics for Professional Accountants™ (the Code). This is a first step in the development of the IESBA’s strategy and work plan beyond 2018.

“By the end of 2017, the IESBA expects to have completed major projects to strengthen the Code as well as restructure it for greater clarity and usability. We recognize that beyond these improvements, it is in the public interest to continue to enhance the Code as a bedrock of public trust in the global accountancy profession, and to promote its further adoption and effective implementation around the world,” said Dr. Stavros Thomadakis, IESBA Chairman. “This survey is an important first step in gathering views on specific developments, needs, and priorities that will enable the Code to remain globally relevant, reinforce its high quality, and facilitate adoption and effective implementation.”

Responses to the survey will inform the IESBA’s development of a formal consultation paper on its Strategy and Work Plan beyond 2018. The consultation paper is expected to be issued in 2018.

A pdf version of the survey is also available.

About the IESBA
The IESBA is an independent standard-setting board that develops and issues, in the public interest, high-quality ethical standards and other pronouncements for professional accountants worldwide. Through its activities, the IESBA develops the Code of Ethics for Professional Accountants, which establishes ethical requirements for professional accountants. The structures and processes that support the operations of the IESBA are facilitated by IFAC. Please visit www.ethicsboard.org for more information, and follow us on Twitter @Ethics_Board.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.

The IFAC Small and Medium Practices Committee welcomes the International Auditing and Assurance Standards Board's agreed-upon procedures Discussion Paper. It strongly believes that the revision of International Standard on Related Services 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information, should be a high priority for the board.