Accounting Estimates has been updated as a result of the revised ASA/ISA 540 applicable for financial reporting periods beginning on or after 15 December 2019. As a result of these changes the form has been split into two main areas:
- B9: Understanding the entity - Accounting Estimates
- B9A: Accounting Estimates Program
The purpose of this structure is to document how the Accounting Estimates apply to the entity as a whole including internal controls, and secondly to understand how each accounting estimate is made and assess the inherent and control risks related to the estimate.
B9: Understanding the entity - Accounting estimates
The objective of this program is to document the understanding of the entity and the entity's control environment as it relates to accounting estimates at the entity level.
Each accounting estimate identified should be entered on the Accounting Estimates section by entering the Accounting Estimates, and the related Disclsoures. This can be performed by filling in the details and selecting Add.
For each Accounting Estimate created a new form will be created in the Working Paper Index.
B9A: Accounting Estimates Program
A separate form will be created for each Accounting Estimate. This should be completed to address the risk of material misstatement at the assertion level through the following approaches
- Obtaining audit evidence from events occurring up to the date of the auditor's report
- Testing how management made the accounting estimate
- Developing an auditor's point estimate or range
In addition, to meet the requirements of ASA/ISA 540 an Audit Area should be added to B3 - Preliminary Risk Assessment so the Inherent and Control Risk can be separately assessed. If not part of the standard audit areas this can be added manually.