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ISSAI Executive Summaries

Executive Summary:

ISSAI 1540 – Auditing Accounting Estimates, including Fair Value Accounting Estimates and Related Disclosures


This Practice Note provides supplementary guidance on ISA 540 - Auditing Accounting Estimates, including Fair Value Accounting Estimates, and Related Disclosures.

ISSAI Category:

Level 4: General Auditing Guidelines - General Auditing Guidelines on Financial Audit

Target Group:

Public sector external auditors


ISA 540 deals with the auditor's responsibilities relating to accounting estimates including fair value accounting estimates and related disclosures in an audit of financial statements. It also includes requirements and guidance on misstatements of individual accounting estimates and indicators of possible management bias.

Scope - Content:

The Practice Note provides additional guidance for public sector auditors related to

  • Objective and Nature of accounting estimates
  • Risk assessment procedures and related activities
  • Identifying and assessing the risks of material misstatement
  • Responses to the assessed risks of material misstatement
  • Further substantive procedures to respond to significant risks
  • Evaluating the reasonableness of the accounting estimates and determining misstatements
  • Indicators of possible management bias.

An Appendix to this ISA provides a general discussion of fair value measurements and disclosures under differential financial reporting frameworks.

Author - Committee:

INTOSAI Professional Standards Committee – Financial Audit Subcommittee


Approved at XXth Congress of INTOSAI, Johannesburg 2010


Related Documents - Executive Summaries:
Related Documents - ISSAI Full Versions:
Related Documents - Others:

ISA 540 is applicable to auditors of public sector entities in their role as auditors of financial statements. It expands how ISA 315 (Identifying and Assessing the Risk of Material Misstatements through Understanding the Entity and its Environment) and ISA 330 (The Auditor's Responses to Assessed Risks) and other  relevant ISA are to be applied in relation to accounting estimates.

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