SAS No. 56 Auditing Accounting Estimates And Related Disclosures

Status

Issued by Auditing Standards Committee in Taiwan on 11 November, 2014

Summary

This Statement deals with the auditor’s responsibilities relating to accounting estimates, including fair value accounting estimates, and related disclosures in an audit of financial statements.
When performing risk assessment procedures and related activities to obtain an understanding of the entity and its environment, including the entity’s internal control, the auditor shall obtain an understanding of the matters for accounting estimates in order to provide a basis for the identification and assessment of the risks of material misstatement for accounting estimates.
In identifying and assessing the risks of material misstatement, the auditor shall evaluate the degree of estimation uncertainty associated with an accounting estimate and determine whether, in the auditor’s judgment, any of those accounting estimates that have been identified as having high estimation uncertainty give rise to significant risks. For accounting estimates that give rise to significant risks, the auditor shall evaluate the following:(a)how management has considered alternative assumptions or outcomes (b)whether the significant assumptions used by management are reasonable (c)management’s intent to carry out specific courses of action and its ability to do so.
The auditor shall evaluate, based on the audit evidence, whether the accounting estimates in the financial statements are either reasonable in the context of the applicable financial reporting framework, or are misstated.
The auditor shall obtain sufficient appropriate audit evidence about whether the disclosures in the financial statements related to accounting estimates are in accordance with the requirements of the applicable financial reporting framework.
The auditor shall review the judgments and decisions made by management in the making of accounting estimates to identify whether there are indicators of possible management bias. The auditor shall obtain written representations from management and, where appropriate, those charged with governance whether they believe significant assumptions used in making accounting estimates are reasonable.
The auditor shall include in the audit documentation: (a) the basis for the auditor’s conclusions about the reasonableness of accounting estimates their disclosure that give rise to significant risks (b) indicators of possible management bias.

Effective date

This Statement is effective from 1 January, 2016.