CA ANZ and ACCA believe that ISA 540 (Revised) Auditing Accounting Estimates and Related Disclosures has achieved its purpose and objectives. However, some challenges still exist. This does not necessarily mean that the standard needs to be amended or increase in complexity. If the standard is revised, the aim should be to clarify and simplify, particularly in light of the interaction with ISA 315 (Revised) Identifying and Assessing the Risks of Material Misstatement. Several of the challenges identified are in relation to application of the standard rather than deficiencies in the principles and requirements of the standard.

In our response to the IAASB/IESBA joint strategy survey we stressed that the board needs clear strategies to decide when emerging issues and feedback results in the need to amend to underlying principles or can be addressed through guidance supporting consistent application. In the absence of clear evidence that a principle in a standard or the Code of Ethics needs revision to respond to change, other forms of response such as outreach, education and guidance should be used.

In the case of ISA (540) revised, the operation of the standard has been impacted by the subsequent revision of ISA 315 and there are potential interactions with current projects such as the audit evidence projects. When assessing the feedback from the post-implementation review (PIR) we urge the board to consider the need for any amendment to ISA 540 carefully, including when it may be appropriate to make such amendments given other ongoing projects and where challenges identified in the feedback can be addressed via further guidance and outreach. 

In considering any potential amendments, the board may also need to consider the changes in the financial reporting landscape, which continues to introduce complexity to estimates.