In Evaluating an Entity's Accounting Estimates, One of an Auditor's

question 457

Multiple Choice

In evaluating an entity's accounting estimates, one of an auditor's objectives is to determine whether the estimates are:

• A) Not subject to bias.
• B) Consistent with industry guidelines.
• C) Based on objective assumptions.
• D) Reasonable in the circumstances.

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Definitions:

Wholly Owned Subsidiary

A company whose entire share capital is owned by another company, making it fully controlled by the parent company.

Statement of Comprehensive Income

A financial statement that includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners, encompassing both net income and other comprehensive income.

Unamortized Premium

The portion of the bond premium that has not yet been expensed in the income statement through amortization.

Effective Interest Rate

The actual rate of interest earned or paid on a loan or investment, taking into account compounding.