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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?

Definitions:

Occipital Lobe

The portion of the cerebral cortex located at the back of the brain, responsible for processing visual information.

Cerebral Cortex

The surface of the cerebrum, the largest structure of the brain, which contains both sensory and motor nerve cell bodies.

Frontal

Frontal pertains to the front part of something, often referring to the frontal lobe of the brain which is associated with decision making, problem-solving, and controlling behavior.

Parietal

Pertaining to the parietal lobe of the brain, which is important for processing sensory information and spatial orientation.