[Global Financial Insights] IAASB Initiates Post-Implementation Review of ISA 540 and More

Editorial Team – [2026] 183 taxmann.com 539 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:-

1. IAASB Initiates Post-Implementation Review of ISA 540 and Seeks Stakeholders Comments

The International Auditing and Assurance Standards Board has launched a public consultation survey as part of its post-implementation review of International Standard on Auditing 540 (Revised). The ISA 540 deals with auditing accounting estimates and related disclosures. Effective for audits of financial statements for periods beginning on or after 15th December 2019, ISA 540 (Revised) introduced more robust requirements and enhanced guidance to strengthen audit quality, particularly in areas involving complex judgments, estimation uncertainty, and management bias.

Through this survey, the IAASB is seeking input from auditors, preparers, regulators, investors, and other stakeholders to evaluate whether the revised standard has achieved its intended objectives and delivered meaningful improvements in audit practices. The consultation specifically seeks views on overall experience with the standard, the usefulness of related non-authoritative guidance and implementation tools, the benefits observed in practice, and any challenges or unintended consequences encountered.

Stakeholders may respond to all questions or only those relevant to their experience, and all responses will be placed on the public record. The survey is open for comments until 15th June 2026.

Source – International Auditing and Assurance Standards Board

2. Financial Reporting Council Seeks Consultation on Temporary Amendment to Third Country Auditor Policy

The Financial Reporting Council has issued a consultation on a proposed temporary amendment to its Third Country Auditor policy that would allow auditors of certain Chinese-registered companies to use Chinese Standards on Auditing for UK listing purposes. The proposal applies to entities listing Global Depositary Receipts in London through the Stock Connect arrangement linked to the London Stock Exchange.

The change is intended to address a perceived barrier for Chinese issuers considering a UK listing and to support broader efforts to enhance London’s competitiveness as a global capital market. The amendment would be time-limited, narrowly scoped, and subject to safeguards, including mandatory registration of auditors with the FRC as Third Country Auditors, ongoing supervisory oversight, and clear disclosure of the auditing standards applied.

The proposal would apply only to companies listed within the designated Stock Connect segment and would not affect other China-registered issuers or the wider Third Country Auditor framework. The FRC is inviting feedback on whether the approach appropriately balances investor protection and audit quality with the objective of supporting economic growth.

Source – Financial Reporting Council

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