Estimates with significant measurement uncertainty — risk assessment and substantive procedures.
To obtain sufficient appropriate audit evidence about whether accounting estimates and related disclosures are reasonable.
SA 540 sits in the Audit Evidence phase of the audit. The Standards on Auditing are issued by the ICAI Auditing and Assurance Standards Board (AASB) and deemed to be prescribed by the Central Government under Section 143(10) of the Companies Act 2013. Compliance with SAs is mandatory for every audit conducted by a Chartered Accountant in India.
For authoritative text, refer to the ICAI AASB Compendium of Standards on Auditing at icai.org.
Editable, letterhead-ready formats that put SA 540 into practice — built from the ICAI working-paper set, free to download.
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SA 540 — Auditing Accounting Estimates and Related Disclosures (Revised) — is a Standard on Auditing issued by the ICAI Auditing and Assurance Standards Board. Estimates with significant measurement uncertainty — risk assessment and substantive procedures. To obtain sufficient appropriate audit evidence about whether accounting estimates and related disclosures are reasonable.
Yes. Standards on Auditing are deemed to be prescribed under Section 143(10) of the Companies Act 2013, and ICAI members must comply with them in every audit of historical financial information. Non-compliance must be justified and can attract professional consequences in peer review, NFRA inspection, and disciplinary proceedings.
Documentation sufficient for an experienced auditor with no previous connection to the audit to understand what was done and why (SA 230). For SA 540 in the audit evidence phase, that means evidencing: Inherent risk factors: estimation uncertainty, complexity, subjectivity, management bias; Identification of significant risks for estimates with high estimation uncertainty; Three procedural strands: (a) events after the date of the FS, (b) test the method, assumptions and data, (c) develop an auditor's point estimate or range.
