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Under SA 540, when management uses a model to estimate Expected Credit Loss (ECL) under Ind AS 109, the auditor should evaluate:
AOnly management's certificate
BThe model's appropriateness, integrity of data inputs, reasonableness of assumptions, and recomputation on test cases
COnly the final ECL number
DOnly the disclosure
Answer & Solution
Correct answer: C. Only the final ECL number
1. SA 540 requires evaluation of the entire estimation process: model, data, assumptions, computation.
2. Final-number-only or certificate-only checks bypass the standard.
3. Disclosure adequacy is separate (SA 540.A132).
_Source: ICAI BoS CA Final Paper 3, Ch 3 "Risk Assessment and Internal Control"_
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