Supporting International Standards

SMP Committee Response to the IAASB ISA 540 Exposure Draft

SMP Committee
Aug 07, 2017 | Comment Letters
10 Pages
English

The IFAC Small and Medium Practices (SMP) Committee submitted this comment letter to the IAASB Exposure Draft, Proposed International Standard on Auditing 540 (Revised) Auditing Accounting Estimates and Related Disclosures.

The SMP Committee supported the IAASB revising ISA 540 and commended it on the considerable amount of work undertaken in developing the proposals. It broadly supports the notion of low inherent risk as a threshold, but strongly believes that to foster consistent treatment of accounting estimates it will need to be explained more thoroughly, and its relationship to the risk of material misstatement further explored. The SMP Committee is concerned that the Exposure Draft over-engineered in some respects, in particular for SMPs. It strongly recommends that further small- and medium-sized entity examples should be included in a separate staff publication. The publication should also cover (a) the link between inherent risk and risk of material misstatement, (b) how the standard can be applied efficiently specifically to smaller audits, such as highlighting the additional work now required for low risk estimates, as well as giving examples how the new requirements for other estimates can be applied efficiently, and (c) examples of the types of documentation that might be appropriate in SME audits.

 

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