Which of the Following Procedures Would an Auditor Ordinarily Perform

question 780

Multiple Choice

Which of the following procedures would an auditor ordinarily perform first in evaluating management's accounting estimates for reasonableness?

• A) Develop independent expectations of management's estimates.
• B) Consider the appropriateness of the key factors or assumptions used in preparing the estimates.
• C) Test the calculations used by management in developing the estimates.
• D) Obtain an understanding of how management developed its estimates.

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products sold by all firms, no barriers to entry, and perfect information among buyers and sellers.

Close Substitutes

Products or services that can easily replace each other in the eyes of consumers due to their similar functions or characteristics.

Imperfectly Competitive

A market structure where individual producers have some control over the price and supply of products, as opposed to perfect competition where no single producer can influence the market.

Market Price

The prevailing rate at which a commodity or service is available for purchase or sale in a specific market.