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Dec 2010
Q5(a)
Procedures the auditor should adopt in respect of auditing accounting estimates include:
– Test the operating effectiveness of the controls over how management made the accounting estimate.what control is the answer refer to?
Thank you.Please can you provide Q names and not just numbers – as these questions are no longer available on ACCA’s www.
This is part of an answer to a general question “Describe the audit procedures required in respect of accounting estimates.” – so not all of the procedures given in the answer will be relevant to every accounting estimate – but will depend on the specific accounting estimate.
Consider, for example, depreciation – the amount of this estimate will depend on the accurate recording of asset amounts, timely recording (for the start of depreciation), depreciation method (e.g. straight-line) and rate (e.g. 20%) or useful life (e.g. 5 years), also residual value (if any). Controls over timely recording of acquisitions (and disposals – since this is when depreciation will end) and the accurate application of the depreciation policy will therefore be relevant to assessing the accounting estimate.Please note that this is NOT a current exam style and standard question. I strongly recommend that you focus on questions since September 2016.
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