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

Responses to the Assessed Risks of Material Misstatement (Ref: Para. 12 )

Responses to the Assessed Risks of Material Misstatements (Ref: Para. 13 )

Testing the Operating Effectiveness of Controls (Ref: Para. 13(c) )

A84.	Testing the operating effectiveness of the controls over how management made the accounting estimate may be an appropriate response when management's process has been well-designed, implemented and maintained, for example:

Controls exist for the review and approval of the accounting estimates by appropriate levels of management and, where appropriate, by those charged with governance.

The accounting estimate is derived from the routine processing of data by the entity's accounting system.

A85.	Testing the operating effectiveness of the controls is required when:

(a)

The auditor's assessment of risks of material misstatement at the assertion level includes an expectation that controls over the process are operating effectively; or

(b)

Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.¹⁹

¹⁹ ISA (UK and Ireland) 330, paragraph 8.