Limited Companies 16.0
We are pleased to issue an update to your Mercia Audit Manual. The principal technical changes in this update relate to:
Changes to Auditing Standards
ISA (UK) 540 (Revised December 2018) – Auditing Accounting Estimates and Related Disclosures
In December 2018 the FRC issued a revised ISA (UK) 540 on Accounting Estimates, to reflect changes made by the IAASB to this standard. The new standard takes effect for audits of financial statements for periods beginning on or after 15 December 2019, although early adoption is permitted. Several other minor consequential amendments were made to other ISAs (UK) early in 2020.
The revised standard is a complete overhaul of the previous version and introduces several key changes to the approach that must be followed when auditing all types of accounting estimate and the associated financial statement disclosures. These changes will strengthen the audit of what can be a difficult area. The revised standard emphasises the need for professional scepticism at all times when assessing the methods, significant assumptions and data used by management when determining accounting estimates to be included in the financial statements, as well as the associated financial statement disclosures.
In order to reflect the requirements of the revised standard the audit methodology now places greater emphasis on the documentation of our understanding of accounting estimates and the risks they present at the planning stage and there is a revision to the workflow of key accounting estimates.
ISA (UK) 570 (Revised September 2019) – Going Concern
In September 2019, the FRC issued a revised version of ISA (UK) 570 on Going Concern, which is effective for audits of financial statements commencing on or after 15 December 2019, although early adoption is permitted. These revisions are in response to a number of recent audit failures regarding going concern, with the requirements of the new standard being much more prescriptive. Accordingly, a number of changes have been made throughout the manual to reflect these requirements, most notably the creation of a going concern work programme within field work.
In addition to the going concern work programme within fieldwork, we have also added a subsequent events programme to fieldwork to give the same level of prominence.
Other changes to the Audit Manual have been made for ISA amendments that are effective for audits of financial statements commencing on or after 15 December 2019.
Please see our help guides on how to use the updated template:
- Mercia updates and how to implement new workpapers
For full list of changes to the Audit Manual, see the attached document below: