In areas of high estimation uncertainty (such as expected credit losses, impairment and litigation provisions) the auditor tests management's method, assumptions and data and may develop a point estimate or range. Whether the uncertainty is adequately disclosed is also evaluated.
Source: BDS 540
Related terms
Accounting estimatesThe determination by management judgement of amounts that cannot be measured precisely, such as provisions, useful lives, expected credit losses and fair values.Significant riskA risk of material misstatement assessed close to the upper end of the spectrum of inherent risk, or one treated as significant by the standards.Key audit mattersMatters that, in the auditor's professional judgement, were of most significance in the audit of the current-period financial statements and are described separately in the report.Adverse opinionThe opinion in which the auditor states that the financial statements are not presented fairly, where misstatements are both material and pervasive.Agreed-upon proceduresAn engagement in which the practitioner performs procedures agreed with the entity and, where relevant, a third party, and reports only the findings without providing assurance.Analytical proceduresThe evaluation of financial information through analysis of plausible relationships among financial and non-financial data.
Last updated: November 8, 2026 · This definition is for general information only.