CAMBODIAN INTERNATIONAL STANDARD ON AUDITING 540 AUDITING .

2y ago
51 Views
7 Downloads
434.01 KB
36 Pages
Last View : 1m ago
Last Download : 2m ago
Upload by : Adalynn Cowell
Transcription

CAMBODIAN INTERNATIONAL STANDARD ON AUDITING 540AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIRVALUE ACCOUNTING ESTIMATES, AND RELATEDDISCLOSURES(Effective for audits of financial statements for periods beginning on or afterDecember 15, 2009)CONTENTSParagraphIntroductionScope of this CISA .1Nature of Accounting Estimates .2–4Effective Date .5Objective .6Definitions .7RequirementsRisk Assessment Procedures and Related Activities .8–9Identifying and Assessing the Risks of Material Misstatement .10–11Responses to the Assessed Risks of Material Misstatement .12–14Further Substantive Procedures to Respond to Significant Risks .15–17Evaluating the Reasonableness of the Accounting Estimates, and Determining Misstatements .18Disclosures Related to Accounting Estimates.19–20Indicators of Possible Management Bias.21Written Representations .22Documentation .23Application and Other Explanatory MaterialNature of Accounting Estimates.A1–A11Risk Assessment Procedures and Related Activities .A12–A44Identifying and Assessing the Risks of Material Misstatement .A45–A51Responses to the Assessed Risks of Material Misstatement . A52–A101Further Substantive Procedures to Respond to Significant Risks . A102–A115Evaluating the Reasonableness of the Accounting Estimates, and Determining Misstatements . A116–A119Disclosures Related to Accounting Estimates . A120–A123Indicators of Possible Management Bias . A124–A125Written Representations . A126–A127Documentation .A128Appendix: Fair Value Measurements and Disclosures under Different Financial Reporting Frameworks1

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURESCAMBODIAN INTERNATIONAL STANDARD ON AUDITING (CISA) 540, AuditingAccounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures,should be read in conjunction with CISA 200, Overall Objectives of the Independent Auditor andthe Conduct of an Audit in Accordance with Cambodian International Standards on Auditing.2

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURESIntroductionScope of this CISA1.This CAMBODIAN INTERNATIONAL STANDARD ON AUDITING (CISA) deals with theauditor’s responsibilities relating to accounting estimates, including fair value accountingestimates, and related disclosures in an audit of financial statements. Specifically, it expands onhow CISA 315 (Revised)1 and CISA 3302and other relevant CISAs are to be applied in relationto accounting estimates. It also includes requirements and guidance on misstatements ofindividual accounting estimates, and indicators of possible management bias.Nature of Accounting Estimates2.Some financial statement items cannot be measured precisely, but can only be estimated. Forpurposes of this CISA, such financial statement items are referred to as accounting estimates.The nature and reliability of information available to management to support the making of anaccounting estimate varies widely, which thereby affects the degree of estimation uncertaintyassociated with accounting estimates. The degree of estimation uncertainty affects, in turn, therisks of material misstatement of accounting estimates, including their susceptibility tounintentional or intentional management bias. (Ref: Para. A1–A11)3.The measurement objective of accounting estimates can vary depending on the applicablefinancial reporting framework and the financial item being reported. The measurement objectivefor some accounting estimates is to forecast the outcome of one or more transactions, events orconditions giving rise to the need for the accounting estimate. For other accounting estimates,including many fair value accounting estimates, the measurement objective is different, and isexpressed in terms of the value of a current transaction or financial statement item based onconditions prevalent at the measurement date, such as estimated market price for a particulartype of asset or liability. For example, the applicable financial reporting framework may requirefair value measurement based on an assumed hypothetical current transaction betweenknowledgeable, willing parties (sometimes referred to as “marketplace participants” orequivalent) in an arm’s length transaction, rather than the settlement of a transaction at somepast or future date.34.A difference between the outcome of an accounting estimate and the amount originallyrecognized or disclosed in the financial statements does not necessarily represent a misstatementof the financial statements. This is particularly the case for fair value accounting estimates, asany observed outcome is invariably affected by events or conditions subsequent to the date atwhich the measurement is estimated for purposes of the financial statements.Effective Date5.This CISA is effective for audits of financial statements for periods beginning on or afterDecember 15, 2009.Objective6.The objective of the auditor is to obtain sufficient appropriate audit evidence about whether:1CISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity andIts Environment2 CISA 330, The Auditor’s Responses to Assessed Risks3 Different definitions of fair value may exist among financial reporting frameworks.3

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURES(a)accounting estimates, including fair value accounting estimates, in the financialstatements, whether recognized or disclosed, are reasonable; and(b)related disclosures in the financial statements are adequate,in the context of the applicable financial reporting framework.Definitions7.For purposes of the CISAs, the following terms have the meanings attributed below:(a)Accounting estimate – An approximation of a monetary amount in the absence of aprecise means of measurement. This term is used for an amount measured at fair valuewhere there is estimation uncertainty, as well as for other amounts that requireestimation. Where this CISA addresses only accounting estimates involvingmeasurement at fair value, the term “fair value accounting estimates” is used.(b)Auditor’s point estimate or auditor’s range – The amount, or range of amounts,respectively, derived from audit evidence for use in evaluating management’s pointestimate.(c)Estimation uncertainty – The susceptibility of an accounting estimate and relateddisclosures to an inherent lack of precision in its measurement.(d)Management bias –A lack of neutrality by management in the preparation ofinformation.(e)Management’s point estimate – The amount selected by management for recognition ordisclosure in the financial statements as an accounting estimate.(f)Outcome of an accounting estimate – The actual monetary amount which results fromthe resolution of the underlying transaction(s), event(s) or condition(s) addressed by theaccounting estimate.RequirementsRisk Assessment Procedures and Related Activities8.4When performing risk assessment procedures and related activities to obtain an understandingof the entity and its environment, including the entity’s internal control, as required by CISA315 (Revised),4 the auditor shall obtain an understanding of the following in order to provide abasis for the identification and assessment of the risks of material misstatement for accountingestimates: ( Ref: Para. A 12)(a)The requirements of the applicable financial reporting framework relevant to accountingestimates, including related disclosures. (Ref: Para. A13– A15)(b)How management identifies those transactions, events and conditions that may give riseto the need for accounting estimates to be recognized or disclosed in the financialstatements. In obtaining this understanding, the auditor shall make inquiries ofmanagement about changes in circumstances that may give rise to new, or the need torevise existing, accounting estimates. (Ref: Para. A16–A21)(c)How management makes the accounting estimates, and an understanding of the data onwhich they are based, including: (Ref: Para. A22–A23)CISA 315 (Revised), paragraphs 5–6 and 11–124

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURES9.(i)The method, including where applicable the model, used in making theaccounting estimate; (Ref: Para. A24–A26)(ii)Relevant controls; (Ref: Para. A27–A28)(iii)Whether management has used an expert; (Ref: Para. A29–A30)(iv)The assumptions underlying the accounting estimates; (Ref: Para. A31–A36)(v)Whether there has been or ought to have been a change from the prior period inthe methods for making the accounting estimates, and if so, why; and (Ref: Para.A37)(vi)Whether and, if so, how management has assessed the effect of estimationuncertainty. (Ref: Para. A38)The auditor shall review the outcome of accounting estimates included in the prior periodfinancial statements, or, where applicable, their subsequent re-estimation for the purpose of thecurrent period. The nature and extent of the auditor’s review takes account of the nature of theaccounting estimates, and whether the information obtained from the review would be relevantto identifying and assessing risks of material misstatement of accounting estimates made in thecurrent period financial statements. However, the review is not intended to call into question thejudgments made in the prior periods that were based on information available at the time. (Ref:Para. A39–A44)Identifying and Assessing the Risks of Material Misstatement10.In identifying and assessing the risks of material misstatement, as required by CISA 315(Revised),5 the auditor shall evaluate the degree of estimation uncertainty associated with anaccounting estimate. (Ref: Para. A45–A46)11.The auditor shall determine whether, in the auditor’s judgment, any of those accountingestimates that have been identified as having high estimation uncertainty give rise to significantrisks. (Ref: Para. A47–A51)Responses to the Assessed Risks of Material Misstatement12.5Based on the assessed risks of material misstatement, the auditor shall determine: (Ref: Para.A52)(a)Whether management has appropriately applied the requirements of the applicablefinancial reporting framework relevant to the accounting estimate; and (Ref: Para. A53–A56)(b)Whether the methods for making the accounting estimates are appropriate and have beenapplied consistently, and whether changes, if any, in accounting estimates or in themethod for making them from the prior period are appropriate in the circumstances.(Ref: Para. A57–A58)CISA 315 (Revised), paragraph 255

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURES13.14.In responding to the assessed risks of material misstatement, as required by CISA 330,6 theauditor shall undertake one or more of the following, taking account of the nature of theaccounting estimate: (Ref: Para. A59 –A 61)(a)Determine whether events occurring up to the date of the auditor’s report provide auditevidence regarding the accounting estimate. (Ref: Para. A62–A67)(b)Test how management made the accounting estimate and the data on which it is based.In doing so, the auditor shall evaluate whether: (Ref: Para. A68–A70)(i)The method of measurement used is appropriate in the circumstances; and (Ref:Para. A71–A76)(ii)The assumptions used by management are reasonable in light of themeasurement objectives of the applicable financial reporting framework. (Ref:Para. A77–A83)(c)Test the operating effectiveness of the controls over how management made theaccounting estimate, together with appropriate substantive procedures. (Ref: Para. A84–A86)(d)Develop a point estimate or a range to evaluate management’s point estimate. For thispurpose: (Ref: Para. A87–A91)(i)If the auditor uses assumptions or methods that differ from management’s, theauditor shall obtain an understanding of management’s assumptions or methodssufficient to establish that the auditor’s point estimate or range takes into accountrelevant variables and to evaluate any significant differences frommanagement’s point estimate. (Ref: Para. A92)(ii)If the auditor concludes that it is appropriate to use a range, the auditor shallnarrow the range, based on audit evidence available, until all outcomes withinthe range are considered reasonable. (Ref: Para. A93–A95)In determining the matters identified in paragraph 12 or in responding to the assessed risks ofmaterial misstatement in accordance with paragraph 13, the auditor shall consider whetherspecialized skills or knowledge in relation to one or more aspects of the accounting estimatesare required in order to obtain sufficient appropriate audit evidence. (Ref: Para. A96–A101)Further Substantive Procedures to Respond to Significant RisksEstimation Uncertainty15.67For accounting estimates that give rise to significant risks, in addition to other substantiveprocedures performed to meet the requirements of CISA 330,7 the auditor shall evaluate thefollowing: (Ref: Para. A102)(a)How management has considered alternative assumptions or outcomes, and why it hasrejected them, or how management has otherwise addressed estimation uncertainty inmaking the accounting estimate. ( Ref: Para. A103–A 106)(b)Whether the significant assumptions used by management are reasonable. (Ref: Para.A107–A109)CISA 330, paragraph 5CISA 330, paragraph 186

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURES(c)16.Where relevant to the reasonableness of the significant assumptions used bymanagement or the appropriate application of the applicable financial reportingframework, management’s intent to carry out specific courses of action and its ability todo so. (Ref: Para. A110)If, in the auditor’s judgment, management has not adequately addressed the effects of estimationuncertainty on the accounting estimates that give rise to significant risks, the auditor shall, ifconsidered necessary, develop a range with which to evaluate the reasonableness of theaccounting estimate. (Ref: Para. A111–A112)Recognition and Measurement Criteria17.For accounting estimates that give rise to significant risks, the auditor shall obtain sufficientappropriate audit evidence about whether:(a)Management’s decision to recognize, or to not recognize, the accounting estimates inthe financial statements; and (Ref: Para. A113– A114)(b)The selected measurement basis for the accounting estimates, (Ref: Para. A115) are inaccordance with the requirements of the applicable financial reporting framework.Evaluating the Reasonableness of the Accounting Estimates, and Determining Misstatements18.The auditor shall evaluate, based on the audit evidence, whether the accounting estimates in thefinancial statements are either reasonable in the context of the applicable financial reportingframework, or are misstated. (Ref: Para. A116–A119)Disclosures Related to Accounting Estimates19.The auditor shall obtain sufficient appropriate audit evidence about whether the disclosures inthe financial statements related to accounting estimates are in accordance with the requirementsof the applicable financial reporting framework. (Ref: Para. A120–A121)20.For accounting estimates that give rise to significant risks, the auditor shall also evaluate theadequacy of the disclosure of their estimation uncertainty in the financial statements in thecontext of the applicable financial reporting framework. (Ref: Para. A122–A123)Indicators of Possible Management Bias21.The auditor shall review the judgments and decisions made by management in the making ofaccounting estimates to identify whether there are indicators of possible management bias.Indicators of possible management bias do not themselves constitute misstatements for thepurposes of drawing conclusions on the reasonableness of individual accounting estimates. (Ref:Para. A124– A125)Written Representations22.The auditor shall obtain written representations from management and, where appropriate, thosecharged with governance whether they believe significant assumptions used in makingaccounting estimates are reasonable. (Ref: Para. A126–A127)Documentation7

CISA 540, AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUEACCOUNTING ESTIMATES, AND RELATED DISCLOSURESThe auditor shall include in the audit documentation:823.(a)The basis for the auditor’s conclusions about the reasonableness of accounting estimatesand their disclosure that give rise to significant risks; and(b)Indicators of possible management bias, if any. (Ref: Para. A128)***Application and Other Explanatory MaterialNature of Accounting Estimates ( Ref: Para. 2)A1.Because of the uncertainties inherent in business activities, some financial statement items canonly be estimated. Further, the specific characteristics of an asset, liability or component ofequity, or the basis of or method of measurement prescribed by the financial reportingframework, may give rise to the need to estimate a financial statement item. Some financialreporting frameworks prescribe specific methods of measurement and the disclosures that arerequired to be made in the financial statements, while other financial reporting frameworks areless specific. The Appendix to this CISA discusses fair value measurements and disclosuresunder different financial reporting frameworks.A2.Some accounting estimates involve relatively low estimation uncertainty and may give rise tolower risks of material misstatements, for example:A3.8 Accounting estimates arising in entities that engage in business activities that are not complex. Accounting estimates that are frequently made and updated because they relate to routinetransactions. Accounting estimates derived from data that is readily av

CAMBODIAN INTERNATIONAL STANDARD ON AUDITING 540 AUDITING ACCOUNTING ESTIMATES, INCLUDING FAIR VALUE ACCOUNTING ESTIMATES, AND RELATED DISCLOSURES . how CISA 315 (Revised)1 and CISA 3302and other relevant CISAs are to be applied in relation to accounting estimates. It also includes requirements and guidance on misstatements of

Related Documents:

This paper is intended as an overview of Cambodian law and the legal system as well as the Royal Government of Cambodia's efforts at legal and judicial reform. II. Cambodian Legal and Judicial System 1. Overview of the Cambodian Legal System Like most countries in the region and the world, the Cambodian legal system has evolved

Chapter 05 - Auditing and Advanced Threat Analytics 1h 28m Topic A: Configuring Auditing for Windows Server 2016 Overview of Auditing The Purpose of Auditing Types of Events Auditing Goals Auditing File and Object Access Demo - Configuring Auditing Topic B: Advanced Auditing and Management Advanced Auditing

fear amongst the study population, and that Cambodian American elders garden because growing extra food will alleviate their mental health. BACKGROUND . Khmer Rouge The Cambodian Genocide (1975-1979) was one of the most atrocious genocides in the Cambodian history. In the 1970s, after the Indochina War spread to Cambodia, Lon Nol, a

of Auditing and Assurance-Introduction (Auditing 1) and Auditing and Assurance-Intermediate (Auditing 2). This course is designed to provide an introduction to auditing and assurance services. Level of Proficiency in Auditing 1: Foundation Subject Learning Outcome Upon completion of the subj

SECTION-1 (AUDITING) INTRODUCTION TO AUDITING STRUCTURE: 1.1 Objectives 1.2 Introduction -an overview of auditing 1.3 Origin and evolution 1.4 Definition 1.5 Salient features 1.6 Scope of auditing 1.7 Principles of auditing 1.8 Objects of audit 1.9 Detection and prevention of fraud 1.2 1.10 Concept of " true and fair view"

5 GMP Auditing 6 GCP Auditing 7 GLP Auditing 8 Pharmacovigilance Auditing 9 Vendor/Supplier Auditing 10 Remediation 11 Staff Augmentation 12 Data Integrity & Computer System Validation . the training it needs to maintain quality processes in the future. GxP Auditing, Remediation, and Staff Augmentation The FDAGroupcom 9

labour law into a single, comprehensive guide for the manufacturing sector. The Guide covers all major areas of Cambodian labour law, derived from the Labour Law itself, regulations of the Royal Government, international labour standards that have been ratified by Cambodia, and the Cambodian Constitution.

2018 Accounting Higher Finalised Marking Instructions Scottish Qualifications Authority 2018 The information in this publication may be reproduced to support SQA qualifications only on a non-commercial basis. If it is reproduced, SQA should be clearly acknowledged as the source. If it is to be used for any other purpose, written permission must be obtained from permissions@sqa.org.uk. Where .