IRBA NEWSLETTER ISSUE 44

5 / 22

Resources and Tools for Small- and Medium-Sized
Practitioners
The IRBA website has been updated for small- and medium-
sized practitioners (SMP) resources and tools developed by the
International Federation of Accountants (IFAC). This follows the
IFAC’s recent issue of updated information.
IFAC’s SMP Committee represents the interests of professional
accountants in the SMP sector. The committee develops guidance
and tools, and also works to ensure that the needs of the SMP and
the small- and medium-sized entities (SME) sectors are considered
by standard setters and regulators.
SMPs may find the publications useful in running their practices and
for SME engagements. A full list of resources and tools is available
on the
These publications have not been issued as guidance in South
Africa as they have not undergone the IAASB’s or IRBA’s due
process for the development of International Standards. However,
the guidance may be of use to SMPs, bearing in mind that
registered auditors are required to apply the International Standard
on Quality Control 1 and the IAASB’s International Standards.
Those standards also provide, in certain circumstances, for the
perspectives of SME engagements to be considered.
The following document has been added to the list of SMP
resources:
Description Issued
Guide to Using International Standards on
Auditing in the Audits of Small- and Medium-
Sized Entities, Fourth Edition
17 July 2018
The new document listed above is available in PDF format and
may be downloaded from the Alternatively, a link
to this document is available on the Should
you have any further queries, please do not hesitate to contact the
Standards Department by email at
Committee for Auditing Standards (CFAS)
International Standard on Auditing (ISA) 540
(Revised), Auditing Accounting Estimates and Related
Disclosures
The IAASB issued ISA 540 (Revised), Auditing Accounting Estimates
and Related Disclosures, on 3 October 2018.
The IRBA Board approved ISA 540 (Revised) for adoption, issue
and prescription for use by registered auditors in South Africa
at its meeting on 6 November 2018. The revisions to ISA 540
(Revised) include those that are responsive to the significant local
and international inspection findings on the audit of accounting
estimates.
Banks, insurers and other financial service providers have seen
revolutionary changes in their accounting practices as they have
moved to new accounting standards that transformed the way they
deal with loan provisions (International Financial Reporting Standard
(IFRS) 9, Financial Instruments) and insurance contracts (IFRS 17,
Insurance Contracts). ISA 540 (Revised) reflects this rapidly evolving
business environment and ensures that the standard continues to
keep pace with the changing market.
Some of the significant revisions include:
• An enhanced risk assessment that requires auditors to
consider complexity, subjectivity and other inherent risk factors,
in addition to estimation uncertainty. This will drive auditors
to think more deeply about the risks inherent to accounting
estimates.
• A closer link between the enhanced risk assessment and the
methods, data and assumptions used in making accounting
estimates, including the use of complex models.
• A requirement for a separate assessment of inherent risk and
control risk.
• Specific material to show how the standard is scalable to all
types of accounting estimates.
• Emphasis on the importance of applying appropriate
professional scepticism when auditing accounting estimates
to foster a more independent and challenging sceptical mind-
set in auditors. An example is the introduction of a “stand-
back” requirement or “overall evaluation based on audit
evidence obtained” that requires auditors to take into account
all relevant audit evidence obtained, whether corroborative or
contradictory.
ISA 540 (Revised) becomes effective for financial statement audits
for periods beginning on or after 15 December 2019. Early adoption
of ISA 540 (Revised) is permissible and is encouraged by the IRBA.
It is critical that all parties in the financial reporting supply chain
collaborate in the implementation of a standard that has such far-
reaching effects on the audit of financial statements. The IAASB
will provide implementation support to help auditors navigate and
apply the revised standard. Please visit the IAASB website for more
information.
ISA 540 (Revised) may be downloaded from the
Revised Guide for Registered Auditors: Assurance
Engagements on the Annual Financial Statements and
Annual Statutory Returns of a Medical Scheme
The CFAS approved the Revised Guide for Registered Auditors:
Assurance Engagements on the Annual Financial Statements and
Annual Statutory Returns of a Medical Scheme (this Revised Guide)
in November 2018 for issue.
This Revised Guide provides guidance to a registered auditor on
conducting an assurance engagement on the annual financial
statements and annual statutory returns of a medical scheme.
This guidance focuses on understanding the nature and
characteristics of a medical scheme, as well as the nature and
extent of work on the engagement.
STANDARDS cont.
Issue 44 | October-December 2018 5