Estimates

Which of the following is one of the main sources of estimation uncertainity in financial statements?

• A.Cash transactions
• B.Fixed Assets
• C.Accounting Policies
• D.Inventory Counts

Which of the following audit procedures is NOT typically used to evaluate the reaosnableness of accounting estimates?

• A. Reviewing management's process for developing estimates.
• B. Assessing the qualifications of auditor
• C. Comparing management's estimates to industry benchmarks.
• D. Testing the underlying data and assumptions used in the estimates.

Which of the following statements about accounting estimates is TRUE?

• A. They are always based on precise and verifiable data.
• B. They are only required for complex financial transactions.
• C. They involve judgment by management.
• D. They are not subject to audit procedures.

When auditing accounting estimates, what is the primary focusof the auditor's procedures?

• A. Ensuring that the estimates are precise.
• B. Confirming the estimates with external parties.
• C. Evaluating the reasonableness of the estimates.
• D. Determining the absolute value of estimate.

Which of the following is NOT a common accounting estimate in financial statements?

• A. Bad debt expense
• B. Inventory valuation
• C. Depreciation expense
• D. Cash Balance

In auditing accounting estimates, the auditor often assess the reasonableness of significant assumptions. Which of the following is NOT typically considered a significant assumption?

• A. Future market conditions
• B. Customer creditworthiness
• C. Historical cost
• D. Growth rates

Which of the following statements about the risk of material misstatement related to accounting estimates is TRUE?

• A. The risk of material misstatement is always low for accounting estimates.
• B. The risk of material misstatement is unaffected by complexity of the estimates.
• C. The risk of material misstatement may vary depending on the nature and circumstances of the estimates.
• D. All of the above.

When auditing accounting estimates, which of the following is a potential consequence of manahgement bias?

• A. Understanding the risk of material misstatement
• B. Overstating the estimates to meet financial targets
• C. Both of the above.
• D. None of the above.

Which of the following best describes the auditor's responsibility regarding accounting estimates?

• A. To determine the estimates that are most favourable to the client.
• B. To assess the reasonableness of the accounting estimates.
• C. To prepare the estimates on behalf of client.
• D. None of the above.

Which of the following is NOT a common audit procedure used to test the reasonableness of accounting estimate?

• A. Reviewing subsequent events.
• B. Comparing estimates to industry benchmarks.
• C. Testing the accuracy of mathematical calculations.
• D. Confirming estimates with external parties.