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In: Accounting
What are the auditor’s responsibilities for auditing accounting estimates made by management?
What are the auditor’s responsibilities for auditing accounting estimates made by management?
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Expert Solution
Followings are the auditor’s responsibilities for auditing accounting estimates made by management;
1. Auditor need to clarify about how management identifies related transactions, events and conditions which gives rise to the need for estimates.
2. Auditor need to clarify about how management makes the estimates?
3. Auditor need to clarify about the control procedures to minimise the risk of misstatement.
4. Auditor need to evaluate the degree of uncertainty related with accounting estimates.
5. Auditor need to see whether degree of uncertainty will give rise to risks or not?
6. Auditor need to review outcomes of the estimates made in the prior periods.
7. Auditor also need to consider events take place after the reporting period.
8. Auditor need to study carefully the basis and data on which management made various accounting estimates.
9. Auditor also need to check operating efficiency of the control process.
10. Auditor is responsible to develop an independent estimate for comparison purpose etc.
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