Audit procedures of accounting estimates

It means for example, if there is a warranty provision, the accounting estimates for the warranty provisions has to be made by the management by using the Present Value of the Expected Value of the sales of their products. As such, subsequent to the year end and up to the date of the auditor’s report, there will be some evidence on whether the ACTUAL claim that has been made has it been consistent with these estimates made by the management on the provision of these warranty claims.

Another example will be share based payments and in that whether the number of staff that has not been vested has been consistent with the management’s estimates. However, this, together with defined benefits usually require the work of the management expert, such as an actuary or expert in options valuation but the points that I have made are still valid in terms of the assumptions used.