Document ID: chunk:federal_register_of_legislation:F2019L00016:reg:20:p4
Version: federal_register_of_legislation:F2019L00016
Segment Type: reg
Provision Reference: reg 20 (pt 4/9)
Character Range: 19503–22769

practices and on the quality of the disclosures. When applicable, this may include whether a significant accounting practice of the entity relating to accounting estimates is considered by the auditor not to be most appropriate to the particular circumstances of the entity, for example, when an alternative acceptable method for making an accounting estimate would, in the auditor's judgement, be more appropriate.  Appendix 2 identifies matters that may be included in this communication.

20.               Existing footnote in paragraph A28 is amended to read as follows:

See paragraphs 19–22 and A24–A33 of ASA 220, Quality Control for an Audit of a Financial Report, paragraphs 19–22 and A24–A33.

Amendments to ASA 260 Appendix 1

21.               After the existing seventh point, the following point is inserted as follows:

           * ASA 540 Auditing Accounting Estimates and Related Disclosures – paragraph 38

Amendments to ASA 260 Appendix 2

22.               The heading Accounting Estimates is amended to read as follows:

Accounting Estimates and Related Disclosures

23.               Under the existing heading Accounting Estimates, the following amendments are made:

           * For items for which estimates are significant, issues discussed in ASA 540,29 including, for example: Appendix 2 of ASA 540 includes matters that the auditor may consider communicating with respect to significant qualitative aspects of the entity's accounting practices related to accounting estimates and related disclosures.

                   + How management identifies those transactions, events and conditions that may give rise to the need for accounting estimates to be recognised or disclosed in the financial report.

                   + Changes in circumstances that may give rise to new, or the need to revise existing, accounting estimates.

                   + Whether management's decision to recognise, or to not recognise, the accounting estimates in the financial report is in accordance with the applicable financial reporting framework.

                   + Whether there has been or ought to have been a change from the prior period in the methods for making the accounting estimates and, if so, why, as well as the outcome of accounting estimates in prior periods.

                   + Management's process for making accounting estimates (e.g., when management has used a model), including whether the selected measurement basis for the accounting estimate is in accordance with the applicable financial reporting framework.

                   + Whether the significant assumptions used by management in developing the accounting estimate are reasonable.

                   + Where relevant to the reasonableness of the significant assumptions used by management or the appropriate application of the applicable financial reporting framework, management's intent to carry out specific courses of action and its ability to do so.

                   + Risks of material misstatement.

                   + Indicators of possible management bias.

                   + How management has considered alternative assumptions or outcomes and why it has rejected them, or how management has otherwise addressed estimation uncertainty in