Accounting estimates, by their nature _______.
A)involve objective decision making on the part of management
B)involve subjective decision making on the part of management
C)should cause little or no variance at the end of the period
D)should not be estimated by management, but rather by the auditor at the end of the period

Question

Quizplus · Accepted Answer

Accounting estimates involve subjective decision making on the part of management, as they require judgement and assumptions to be made based on available information. While management is expected to use reasonable and supportable estimates, these estimates can still vary at the end of the period due to changes in circumstances or new information. It is not the auditor's role to estimate accounting estimates, but rather to evaluate the reasonableness of management's estimates and the adequacy of their disclosures.

Accounting Estimates, by Their Nature _______