In order to evaluate management's estimation process, _______.
A)auditors use the knowledge gained about the industry and the applicable financial reporting framework during risk assessment
B)auditors use the knowledge gained about other industries and the applicable financial reporting framework during risk assessment
C)auditors compare management estimates with other management estimates at other companies
D)the auditors ask the internal audit function to review and come to a conclusion which can be included in the audit report

Question

Quizplus · Accepted Answer

Auditors use the knowledge gained about the industry and the applicable financial reporting framework during risk assessment to evaluate management's estimation process. This helps them to gain an understanding of the key drivers of the business and the potential risks associated with the estimates, as well as the requirements of the relevant accounting standards. Comparing management estimates with those of other companies or asking the internal audit function to review and come to a conclusion is not a necessary or typical part of evaluating management's estimation process.

In Order to Evaluate Management's Estimation Process, _______