AU-C 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures states the objective of the auditor is to obtain sufficient appropriate evidence that _______.
A)the accounting estimates are reasonable
B)accounting estimates are reasonable, but disclosures are not adequate
C)accounting estimates are reasonable, and disclosures are adequate
D)disclosures are adequate

Question

Quizplus · Accepted Answer

The objective of the auditor is to obtain sufficient appropriate evidence that accounting estimates are reasonable, and disclosures are adequate. This means that the auditor must assess both the reasonableness of the estimates themselves and their related disclosures in the financial statements. Simply assessing the reasonableness of the estimates alone, or the adequacy of the disclosures alone, is not sufficient to meet the objective of the auditor as stated in AU-C 540.