According to Auditing Standards,specific Relevant Aspects of an Internal Control

question 2

Essay

According to auditing standards,specific relevant aspects of an internal control system for making estimates include:
• Management communication of the need for proper accounting estimates.
• Accumulation of relevant,sufficient,and reliable data for estimates.
• Preparation of estimates by qualified personnel.
• Adequate review and approval by appropriate levels of authority.
• Comparison of prior estimates with subsequent results to assess the reliability of the estimation outcomes.
• Consideration by management of whether particular accounting estimates are consistent with the company's operational plans.
Required:
a.How would the auditor test these control activities over the production of estimates?
b.What substantive audit procedures would the auditor use to test the accounting estimates?

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Definitions:

Principal Diagnosis

The principal diagnosis is the primary condition determined after study to be chiefly responsible for a patient's admission to a hospital for care.

Principal Diagnosis

The main condition diagnosed at the end of a hospital stay or health care encounter that primarily motivated the treatment.

ATC

Average Total Cost, the sum of all costs divided by the quantity of output produced, a key concept in economics for understanding profitability at different production levels.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing full industry adjustment.