Accounting Estimates Flashcards

1
Q

Objective:

A

1) Obtain appropriate audit evidence about accounting estimates are REASONABLE
2) Related disclosures are adequate in view of the applicable financial reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define accounting estimate:

A

Approximation of a monetary amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define estimation uncertainty:

A

The susceptibility of an accounting estimate and related disclosures to an inherent lack of precision in its measurement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the risk assessment procedures:

A

Obtain an understanding of:

  • Requirements of applicable financial reporting framework
  • How management makes the accounting estimates and the data on which they are based
  • The method (or model) used & assumptions made
  • Obtain an understanding if management used a specialist and how they assessed uncertainty
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

In assessing RMM with respect to accounting estimates the auditor should:

A
  • Evaluate the degree of estimation uncertainty

- Determine any of the estimates result in “significant risk”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When you identify significant risks (in any area, not just estimates) what should the auditor do?

A
  • Obtain an understanding of RELEVANT CONTROLS

- Do controls mitigate such risks?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What should the auditor do to respond to assessed risks?

A
  • Determine whether events up to the report date provides evidence about the estimate
  • Test how management made the estimate and data used
  • Test operating effectiveness of controls
  • Develop a point estimate (or range) to evaluate managements point estimate (analytical procedure)
  • Evaluate the disclosure
  • Consider indicators of possible MANAGEMENT BIAS
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What should the auditor document?

A
  • Basis for the auditors conclusions about the REASONABLENESS of any accounting estimates resulting in “significant risk”
  • Any Indicators of management Bias
How well did you know this?
1
Not at all
2
3
4
5
Perfectly