According to Generally Accepted Auditing Standards, the Relevant Aspects of a Control

question 37

Essay

According to generally accepted auditing standards, the relevant aspects of a control system over the preparation of accounting estimates include:
> Identifying where accounting estimates are required.
> Gathering relevant, sufficient, and reliable data for the estimates.
> Developing assumptions about the estimates.
> Preparation of estimates by qualified personnel.
> Adequate review and approval by appropriate levels of authority.
> Comparison of previous estimates with actual results.
> Consideration by management of whether the accounting estimates are reasonable and consistent with the company's operational plans.
Required:
A) How would the auditor test controls over the preparation of accounting estimates?
B) What substantive audit procedures could the auditor use in testing the estimates?

• A) How would the auditor test controls over the preparation of accounting estimates?
• B) What substantive audit procedures could the auditor use in testing the estimates?

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Definitions:

Substitute Good

Refers to a product or service that a consumer sees as the same or similar to another product, thus they can be used interchangeably.

Substitute Goods

Products or services that can be used in place of each other, where the consumption of one increases the likelihood of the other being consumed less.

Demand Curve

A graph showing the relationship between the quantity of a goods or services demanded and its price, usually downward sloping.

Price Increase

A rise in the cost of goods or services over time, affecting the purchasing power of money.