ISA (UK) 540 was most recently revised in 2018 and applies to accounting periods beginning on or after 15 December 2019. This effectively means 31 December 2020 year-ends onwards, although earlier adoption is permitted.

The Financial Reporting Council (FRC), in its review Developments in Audit 2020, says: ‘Revisions to ISA (UK) 540 included recognition of the increasing complexity of accounting estimates and related disclosures, providing an enhanced risk assessment with a closer link to methods, data and assumptions used in making the estimates, including the use of complex models and external information sources, and an enhanced emphasis on the importance of professional scepticism.’

The revised ISA (UK) 540 places greater emphasis on: