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If a company made a high tax provision for the prior year and made a over provision adjustment in the current year, what is the audit risk involve in this kind of issue?
Adjustments are expected for provisions since, by definition, the amount isn’t certain.
Auditors ahould checkthat any provision is reasonble. For example, check the client’s tax calculations. If there had been a material error made in the previous year, then that would have to be explained in this year’s FS.
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