The Client Makes Estimates Relative to Recorded Amounts in the Financial

question 26

Multiple Choice

The client makes estimates relative to recorded amounts in the financial statements. Which of the following assumptions best represents the auditor's primary focus regarding the reasonableness of such estimates?

• A) That historical trends are followed.
• B) That income is managed.
• C) That there is an adequate cushion.
• D) That management reverses estimates when opportune.

---

Definitions:

Occurrences

Events or instances of something happening or being present.

Interval

A range of values in statistics that describes the difference between two points, often used in the classification of scales of measurement.

Random Variable

A variable whose values depend on outcomes of a random phenomenon, with each outcome associated with a different value or set of values.

Occurrences

The instances or times that something happens or arises; the frequency of events.