The Canadian Public Accountability Board published a comment letter from the International Forum of Independent Audit Regulators to the International Auditing and Assurance Standards Board on its post-implementation review of International Standard on Auditing 540 Revised on accounting estimates and related disclosures. IFIAR said the revised standard has only partially achieved its objectives. It credited ISA 540 Revised with clearer expectations on risk assessment, professional skepticism, the stand back requirement, and the evaluation of management’s methods, assumptions and data, but said inspection findings still show recurring weaknesses in how audits of accounting estimates are executed in practice. IFIAR said accounting estimates continue to generate the highest level of inspection findings and urged the IAASB to assess whether targeted revisions, additional application material or further guidance are needed. The letter points to persistent problems in linking identified risks to audit responses, evaluating controls, requiring management to perform additional procedures when estimation uncertainty is not adequately addressed, and challenging management judgments, assumptions and possible bias. It also highlights inadequate use of auditor-developed point estimates or ranges, weak consideration of contradictory evidence and stand back assessments, inconsistent distinctions between high and significant inherent risk, and difficulties auditing advanced or artificial intelligence-driven models and third-party data inputs. IFIAR added that stronger firm-level quality management, including resource allocation, consultation, monitoring and specialist expertise, is important to more consistent audit quality in this area.
Canadian Public Accountability Board2026-06-12
Canadian Public Accountability Board publishes IFIAR letter urging further work on ISA 540 after persistent audit estimate deficiencies
The Canadian Public Accountability Board published an IFIAR comment letter on the IAASB’s review of ISA 540 Revised, saying the standard has improved clarity but only partially delivered in practice. IFIAR said audits of accounting estimates still show persistent deficiencies and called for further analysis of whether targeted revisions or more guidance are needed. The letter also flags challenges in auditing complex and AI-driven models.