ACCA AA Syllabus D. Audit Evidence - Auditing Accounting Estimates - Notes ^{3 / 5}

Management will have to use an element of judgment in preparing the financial statements in areas such as depreciation rates, deferred tax and provisions

The problem with auditing estimates is a lack of physical evidence and subjectivity.

The auditor will carry out several procedures on an area of accounting estimate

1. Look at the process employed to calculate the estimate and decide whether it is appropriate

2. Use the work of an expert to ascertain whether an estimate is accurate

3. Check that any items accrued for do occur after the balance sheet date

4. Discuss any points of concern with management to see why they included the item at the amount they did