Identifying management’s accounting estimates???

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  • December 5, 2020 at 4:27 am #3174930
    Ahmad
    Participant

    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.

    Answer is D

    Can someone please tell me why answer B is wrong, and why D is correct!

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  • December 5, 2020 at 1:35 pm #3175158
    Mike J
    Participant

    At first blush, choice D relies on the expertise of an connected third party, whereas the others do not. See also the theory of using bank confirms

    AUD - 90
    BEC - 79
    FAR - 77
    REG - 77
    They don't trust JUST ANYBODY to count beans
    December 5, 2020 at 1:36 pm #3175161
    Mike J
    Participant

    *unconnected

    AUD - 90
    BEC - 79
    FAR - 77
    REG - 77
    They don't trust JUST ANYBODY to count beans
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