Accountancy Europe responds to the public consultation survey by the International Auditing and Assurance Standards Board (IAASB), part of its post-implementation review (PIR) of ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures. The response reflects input from our members across Europe, bringing together a broad range of perspectives from different jurisdictions. Alongside the survey response, Accountancy Europe also addresses a cover letter to the IAASB setting out several key observations.
While ISA 540 (Revised) has broadly achieved its objective of strengthening the audit of accounting estimates and enhancing audit quality, our response identifies several practical implementation challenges that have emerged since the standard came into effect.
Feedback from our members suggests that ISA 540 (Revised) operates effectively in the context of complex accounting estimates. However, some requirements may be perceived as disproportionate for simple or low-risk estimates where estimation uncertainty is limited. In such circumstances, auditors may be required to perform procedures or documentation that provide limited additional audit value.
The response encourages further consideration of how a more proportionate and scalable approach could be achieved, while continuing to maintain audit quality.
We also draw attention to the practical difficulties arising from the interaction between ISA 540 (Revised) and ISA 315 (Revised 2019), particularly in relation to risk assessment concepts and documentation, where our members observe overlap and duplication in practice. This is, in our view, one of the areas the IAASB may wish to consider most closely, as it may be difficult to address through additional guidance alone.
Accountancy Europe believes that further outreach and information gathering, including detailed inspection findings and root cause analysis from oversight bodies, could help the IAASB better understand the practical difficulties encountered in applying ISA 540 (Revised).
Such information may help distinguish challenges arising from the requirements of the standard itself from those relating to implementation approaches, methodologies, software or training, and support more targeted actions going forward.
Some of these issues may be hard to fix through guidance alone. The IAASB should consider whether the standard could be made simpler, clearer and more proportionate, focusing only on the specific problems identified. Any change, to the standard or through new guidance, should reduce the burden on auditors, not add to it.
Together, the response and accompanying letter aim to contribute constructively to the IAASB’s post-implementation review and to support a standard on accounting estimates that remains effective, proportionate and fit for purpose.
