In Order to Evaluate Management's Estimation Process, _______

question 94

Multiple Choice

In order to evaluate management's estimation process, _______.

• A)auditors use the knowledge gained about the industry and the applicable financial reporting framework during risk assessment
• B)auditors use the knowledge gained about other industries and the applicable financial reporting framework during risk assessment
• C)auditors compare management estimates with other management estimates at other companies
• D)the auditors ask the internal audit function to review and come to a conclusion which can be included in the audit report

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Definitions:

Capital Lease

A lease arrangement that transfers substantially all the risks and rewards of ownership of an asset to the lessee, essentially treated as a purchase.

Retained Earnings

The portion of net earnings not paid out as dividends but instead reinvested in the company or used to pay off debt.

Deferred Income Taxes

Taxes applicable on income that is recognized in financial statements in one period but is taxable in another period.

Income Taxes Payable

Income taxes payable is a liability account on a company's balance sheet representing the amount of income taxes that the company owes to the government but has not yet paid.