AUD — Quick Sheet
Auditing Accounting Estimates
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- 3 approaches: test management's process, develop an independent estimate, review subsequent events
- Higher estimation uncertainty → higher inherent risk, possibly a significant risk
- Estimates all at the favorable end of acceptable ranges = management bias indicator (fraud signal)
- Retrospective review of prior-year estimates is required
- Fair value: Level 1 quoted prices → Level 3 unobservable (highest risk)
- Management's specialist: evaluate competence, capability, objectivity; don't just accept the conclusion