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Status: Canadian Auditing Standard (CAS 540) approved.
Objectives of this Project
Scope
Background
Issues
IAASB Discussions to Date
Further Information Objectives of this Project The objective of this project is to replace existing Canadian standards and guidance on evaluating the reasonableness of accounting estimates used by management for financial reporting purposes and on auditing fair value measurements and disclosures contained in financial statements with the equivalent International Standard on Auditing (ISA). Scope This project proposes to replace Sections 5305, Audit of Accounting Estimates, and 5306, Auditing Fair Value Measurements and Disclosures, with a new Canadian Auditing Standard (CAS) that essentially adopts the revised and clarified International Standard on Auditing 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures (ISA 540), that is currently being developed by the International Auditing and Assurance Standards Board (IAASB). It is closely linked to the project on Materiality. The Canadian standard that will be the outcome of this project will have a new number and title that are the same as ISA 540 – i.e., Canadian Auditing Standard 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures (CAS 540). Background In December 2004, the IAASB published an Exposure Draft of a proposed revised ISA 540. The comment period closed on April 30, 2005. The revisions made to ISA 540 as a result of its exposure in 2005 were discussed and approved by the IAASB in September. The IAASB was then presented with a draft combined ISA, which combines the extant ISAs 540 and 545 while eliminating duplication from the existing ISAs. The IAASB, as part of its Clarity Project, expects to approve an Exposure Draft of Combined ISA 540, prepared in the “clarified” structure, in December 2006. The planned timing of the phases of the IAASB project is included in “Next Steps” below. The AASB’s intention to replace Sections 5305 and 5306 with revised and clarified ISA 540 is in keeping with the AASB’s decision to adopt ISAs. The AASB and staff monitor, review and provide feedback on the IAASB agenda papers and discussions relevant to its project to revise and clarify ISA 540. The AASB and staff also provide comments on the IAASB’s exposure draft, and consider whether any amendments to the ISA are needed in light of specific Canadian circumstances. Any amendments made to the ISA will be clearly highlighted and explained in the Canadian exposure draft and final Handbook material. To view the AASB’s guidelines for amending ISAs when proposing to adopt them as Canadian Auditing Standards, click here. Issues In revising and clarifying existing ISAs 540 and 545, the IAASB is seeking to codify improved practices that have developed since ISA 540 was last revised and to reduce duplication of material by combining ISAs 540 and 545. Further information on the IAASB’s project is available on the IAASB project summary. IAASB Discussions to Date Background papers that are the basis of the IAASB’s discussions, along with meeting summaries and audio recordings of the actual discussions, can be accessed on the IAASB’s website by clicking here and then on the date of the meeting at which matters pertaining to a project were discussed. - Matters pertaining to the revision and clarification of ISAs 540 and 545 were discussed at the following IAASB meetings:
- December 10-14, 2007
- September 24-28, 2007
- December 4-8, 2006
- September 18-22, 2006
- March 6-10, 2006
- October 19-21, 2005
- December 6-10, 2004
- September 13-17, 2004
- April 19-22, 2004
- February 16-18, 2004
- July 21-25, 2003
- May 11-13, 2003
Further Information
Staff support: John Catton, CA
Phone no.: +1 (416) 204-3315 |
