International audit standard addresses estimates

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Dec 01, 2018

On December 1, 2018, the Journal of Accountancy published a summary of the international auditing standard for auditing accounting estimates and related disclosures, which is designed to help auditors keep pace with changes in ­accounting standards for loan provisions and insurance contracts.

Revisions in the standard include:

  • An enhanced risk assessment that requires auditors to consider complexity, subjectivity, and other inherent risk factors in addition to estimation uncertainty.
  • A closer link between the enhanced risk assessment and the methods, data, and assumptions used in making accounting estimates, including the use of complex models.
  • Specific material to show how the standard is scalable to all types of accounting estimates.
  • Emphasis on the importance of applying appropriate professional skepticism when auditing accounting estimates, to foster a more independent and challenging skeptical mindset in auditors.

Review the summary on the Journal of Accountancy's website.

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