How would the auditor test controls over the preparation of accounting estimates?
According to generally accepted auditing standards, the relevant aspects of a
control system over the preparation of accounting estimates include:
> Identifying where accounting estimates are required.
> Gathering relevant, sufficient, and reliable data for the estimates.
> Developing assumptions about the estimates.
> Preparation of estimates by qualified personnel.
> Adequate review and approval by appropriate levels of authority.
> Comparison of previous estimates with actual results.
> Consideration by management of whether the accounting estimates are
reasonable and consistent with the company's operational plans.
Required:
An auditor uses inquiry and observation to obtain an understanding of the policies and procedures over the preparation of the accounting estimate. This aids the auditor in determining the nature, extent, and timing of substantive procedures.
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A. two
B. three
C. four
D. eight
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