Estimates

This topic has 1 reply, 2 voices, and was last updated 13 years ago by Ken Garrett.

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November 29, 2012 at 4:07 am #55895
rutherford
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- Topics: 3
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Dear Tutor,
It is rather difficult to perform tests for estimates. For example, in the balance sheet, most of the assets have been fully depreciated, but still remained in use by the business. This could mean that the depreciation rate has been overstated.
In this case, we will assess the reasonableness of the depreciation rate. The approach we take is to discuss with the management over the reasonableness of the rates. However, other than discussion, what other procedures could we usually take to perform the audit procedures for testing against such estimates?
May I look forward to receiving your help?
November 29, 2012 at 7:26 am #109150
Ken Garrett
Keymaster
- Topics: 10
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You can check what other businesses do for similar assets. You can work out how long the assets are used for and challenge management’s view. You can decide if any differences are material. You can get written management representations.
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