NINJA 681: This also D, which is why I chose B on the second question.
In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate on key factors and assumptions that are:
A. consistent with prior periods.
B. similar to industry guidelines.
C. objective and not susceptible to bias.
D. deviations from historical patterns.
This is the explanation for this one:
In evaluating the reasonableness of an accounting estimate, the auditor focuses on the key factors and assumptions that are deviations from historical patterns. Also of concern to the auditor are key factors and assumptions that are significant, sensitive to variations, and subjective and susceptible to misstatement and bias. Estimates are more likely to be reasonable if they are consistent with prior periods, similar to industry guidelines, and objective and not susceptible to bias.
AND THEN THERE'S THIS…
NINJA 678: This is D
Which of the following procedures most likely would assist an auditor in determining whether management has identified all accounting estimates that could be material to the financial statements?
A.Inquire about the existence of related party transactions.
B.Determine whether accounting estimates deviate from historical patterns.
C.Confirm inventories at locations outside the entity.
D.Review the lawyer’s letter for information about litigation.
Yet this is the explanation for this one:
Of the listed procedures, reviewing the lawyer's letter for information about litigation would most likely assist the auditor in determining whether management has identified all accounting estimates that could be material to the financial statements. Related party transactions and inventories outside the entity are not estimated amounts. Reviewing the historical pattern of accounting estimates will not usually reveal an unidentified accounting estimate.
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