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.
Ask the Tutor ACCA AA
test of control
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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