Exam 19: Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

The actual monetary amount which results from resolution of the underlying transaction(s), event(s), or condition(s) addressed by the accounting estimate is known as ________.

Under the risk-based reasoning (RBR) system of risk-based reasoning for accounting estimates, in the ignore region, the probability of payoff is 1.00 to (one minus acceptable AccR).

What are the three types of misstatements according to CAS 540?

The difference between what was reported and what should have been reported, an auditor's traditional perspective of misstatement, is the basis of the concept of auditing risk.

Accounting estimate nirvana is ________.

Quantified uncertainty is referred to as ________.

The tendency to value what we have because it is ours, regardless of its intrinsic value, is known as the ________.

The tendency to exaggerate the inevitability of causal sequences is known as the ________.

Accounting risk (AccR) is largely geared to reflect business risks of the auditee.

The tendency to exaggerate the inevitability of causal sequences is known as the availability heuristic.

Which of the following statements regarding the going concern concept is FALSE?

Calibration is achieved through repetition and feedback, which improves the quality of expert's estimates.

A(n) ________ is an existing condition, or situation, involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.

Under Canadian audit standard CAS 706, the auditor may decide to place a "red flag" paragraph drawing attention to the uncertainty in the report. If there is material uncertainty about the going-concern assumption, for example, then CAS 706 requires that an emphasis of matter paragraph be added even when there is proper disclosure in the financial statements. Under what circumstances would uncertainty situations cause audit reports to be qualified for departures from GAAP?

Accounting estimate nirvana occurs when the width of the reasonable range is less than or equal to the material misstatement, which means that there is no significant risk for any estimates within the reasonable range.

What are the key concepts and related definitions relating to CAS 540.07?

According to Cockburn, which of the following statements relating to auditors' reasonable ranges is FALSE?

Auditors are susceptible to judgmental biases because of the use of shortcuts or heuristics in the reasoning process.

The nature of any adjustment depends on how wide the range is, as was first noted by Cockburn. Whether the reasonable range (RR) is sufficiently narrow is determined by the level of acceptable accounting risk (AccR). What are the generic rules of thumb for high-assurance engagements involving reasonable ranges that capture high probabilities of future outcomes?

List the various factors that need to be considered regarding the nature and scope of an issue prior to the exercise of professional judgment.