(a) The IAASB has published the Exposure Draft, Proposed ISA 540 (Revised) Auditing Accounting Estimates and Related Disclosures (ED-540) stating ‘The objective of ED-540 is for the auditor to obtain sufficient appropriate audit evidence to evaluate whether accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework, or are misstated. ED-540 includes enhanced requirements for risk assessment procedures and the auditor’s work effort in responding to the assessed risks of material misstatement to support this evaluation.’

Required:
Explain why accounting estimates are considered to be a source of high audit risk and discuss the reasons for the development of ED-540 commenting on its proposals for an enhanced risk assessment in relation to the audit of accounting estimates. (8 marks)