ASB addresses challenges in auditing accounting estimates

A proposal issued by the AICPA Auditing Standards Board (ASB) is intended to provide auditors with enhanced guidance on auditing accounting estimates.

The proposal is intended to address the challenges that auditors face when auditing accounting estimates by providing risk assessment requirements and further audit procedures that:

• Are more specific to estimates, and
• Address the increasingly complex business environment and complexity in financial reporting frameworks.

Proposed Statement on Auditing Standards (SAS), Auditing Accounting Estimates and Related Disclosures, is intended to enable auditors to appropriately address these scenarios and enhance the auditor’s focus on factors driving estimation uncertainty and potential management bias.

The ASB believes the proposal will help auditors exercise professional skepticism, improving audit quality as a result. If approved, the new standard would supersede SAS No. 122, Section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, and would amend other AU-C sections in the AICPA Professional Standards.

Comments will be accepted through Nov. 22 and can be emailed to Sherry Hazel at Sherry.Hazel@aicpa-cima.com.