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IAASB Highlights How Expected Credit Loss Models Will Affect Auditors; Signals Broader Efforts to Strengthen Auditor Efforts on Accounting Estimates

  • IAASB - Assurance Image

Mar 02, 2016

On March 2, 2016, the International Auditing and Assurance Standards Board (IAASB) released a publication highlighting the audit issues arising from the shift to Expected Credit Loss (ECL) models when accounting for loan losses. ECL models are now required, or will soon be required, by some financial reporting frameworks, including IFRS 9, Financial Instruments, which will come into effect from January 1, 2018.

The publication summarizes the audit challenges identified with respect to ECL and sets out initial thinking on how these challenges may be addressed under the current International Standards on Auditing (ISA). The publication has been developed by a task force comprised of IAASB members and technical advisors, representatives from the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, bank auditors, and an observer from the US Public Company Accounting Oversight Board.

The publication also discusses how the IAASB’s new standard-setting project to revise ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, will seek to further address these and other challenges that have been noted in respect of auditing accounting estimates, including in relation to audits of financial institutions.

Review the press release on the IAASB's Web site.

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