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Hello Miss, can you explain what is the ‘stand back’ provision means in the ISA 540?
I found the explanation from the technical article but still not understand it
“A requirement to ‘stand back’ and evaluate the audit evidence obtained regarding the accounting estimates, including both corroborative and contradictory audit evidence.”
And what is spectrum of inherent risk and objective-based work effort under ISA 540?
See 2nd definition here for relevant meaning of stand back https://www.merriam-webster.com/dictionary/stand%20back
The concept of the “spectrum [i.e. a RANGE] of inherent risk” recognises that all risks are not equal. This is one of the key drivers of scalability in the revised standard because where the assessed risk falls on the spectrum will determine what further audit procedures the auditor will need to perform. Ultimately, the higher on the spectrum the risk falls, the more persuasive the audit evidence needs to be.
I suggest it means that the response to the risk depends on the specific risk assessment – so the auditor wouldn’t audit a rent accrual (low risk accounting estimate) in the same way as a provision for a warranty. You aren’t going to be examined on the technical jargon of ISAs – if you wish to read more widely the examinable documents you should also browse the internet if you want to understand them more fully.
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