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:

Frequent Meetings

Regularly scheduled gatherings or discussions, often for project updates, planning, or team coordination.

Individual Abilities

The unique skills, talents, or competencies that distinguish one person from another, often influencing performance and potential.

Dominating Role

A leading or primary position that exercises significant influence or authority over others.

Constructive Feedback

Positive or negative input provided to improve future performance or behavior.