Auditing and Assurance Standards and Guidance

Auditing Standards (Ireland)

FRC ISAs (UK and Ireland) applicable for periods beginning on or after 15 December 2010 but before 17 June 2016

ISA (UK and Ireland) 540 Auditing, accounting estimates, including fair value accounting estimates, and related disclosures

Application and Other Explanatory Material

Risk Assessment Procedures and Related Activities (Ref: Para. 8 )

Obtaining an Understanding of How Management Makes the Accounting Estimates (Ref: Para. 8(c) )

Estimation Uncertainty (Ref: Para. 8(c)(vi) )

A38.	Matters that the auditor may consider in obtaining an understanding of whether and, if so, how management has assessed the effect of estimation uncertainty include, for example:

Whether and, if so, how management has considered alternative assumptions or outcomes by, for example, performing a sensitivity analysis to determine the effect of changes in the assumptions on an accounting estimate.

How management determines the accounting estimate when analysis indicates a number of outcome scenarios.

Whether management monitors the outcome of accounting estimates made in the prior period, and whether management has appropriately responded to the outcome of that monitoring procedure.