3D1 - Auditing Significant Accounting Estimates

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Prospective application of recognizing the effect of a change in an accounting estimate means A. correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occured B. recognizing the effect of the change in the accounting estimate in the current and future periods affected by the change C. applying a new accounting policy to transactions other events and conditions as if the policy had always been applied D. Any of the choices

Fair Value Accounting and Valuation in 3 Steps: Asset or Liability Identification: The first step involves identifying the specific assets or liabilities that will be measured at fair value. This could include financial instruments, tangible assets, intangible assets, or other items on the balance sheet. Market-Based Valuation Techniques: Fair value is determined using market-based valuation techniques. This may involve assessing current market prices, recent transactions, or employing valuation models such as discounted cash flows, comparable sales, or option pricing models. Consistent Application and Disclosure: Fair value accounting requires consistent application of valuation methods across reporting periods. Additionally, transparency and disclosure are crucial, with companies providing detailed information about the inputs, assumptions, and methods used in fair value measurements.

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6. Application of the full disclosure principle a. Is theoretically desirable but not practical. b. Is violated when important financial information je buried in the notes to financial statements. c. Is demonstrated by the use of supplementary information presenting the effects of changing prices.. d. Requires that the financial statements should be consistent and comparable. 7. Accounting policies disclosed in the notes to financial statements typically include all of the following, except a. The cost flow assumption b. The depreciation method c. Significant estimates d. Significant inventory purchasing policies 8. Significant accounting policies may not be a. Selected on the basis of judgment. b. Selected from existing acceptable alternatives. c. Unusual ór innovative in application. d. Omitted from financial statement disclosure. 9. An inventory accounting policy that should be disclosed in a summary of significant accounting policies is a. Composition of inventory into raw…

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Multiple choice 1. A change in measurement basis is most likely a. change in accounting policy. c. error. b. change in accounting estimate. d. any of these 2. A correction of prior period error is accounted for by a. retrospective application. b. retrospective restatement. c. prospective application. d. impracticable application. 3. Which of the following is a change in accounting estimate? a. Change from the cost model to the fair value model of measuring investment property. b. Change in business model for classifying financial assets resulting to the reclassification of a financial asset from being measured at amortized cost to fair value. c. Change in the method of recognizing revenue from long term construction contracts. d. Change in the depreciation method, useful life or residual value of an item of property, plant and equipment. 4. These result from new information or new developments. a. Changes in accounting estimates b. Changes in accounting policies C.…

Subject: Financial Accounting-How do satisfaction-guaranteed refund policies affect revenue recognition? a) Defer all revenue until right expires b) Recognize only non-refundable portion c) Estimate returns based on experience d) Wait for actual returns

Balance sheet Claims, litigations, and assessments Disclosure checklist Factual Hr Misstatements PayMaster Pro for a Qualified or adverse Representation letter Subsequent event

Which of the following audit procedures is least appropriate for addressing the assertion of valuation of liabilities?   a. Confirm with creditors b. Test for unrecorded liabilities. c. Perform analytical procedures. d. Verify accounts payable trial balance

Because of inadequate records the auditor is uncertain as to whether the company’s major investment is recorded at the correct cost. The auditor should issue a/an: A. Unqualified opinion with explanatory paragraphB. Qualified opinionC. Adverse opinionD. Disclaimer opinion

Which statement is incorrect concerning accounting estimate a.As a result of uncertainties inherent in business activities, many items in financial statements cannot be measured withprecision but can only be estimated. b.By its very nature, the revision of an estimate relates to a prior period and is a correction of an error. c.The use of reasonable estimate is an essential part of the preparation of financial statements and does not determinetheir reliability. d.An estimate may need revision if changes occur in the circumstances on which the estimate was based or as result ofnew information or more experience.

The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a statement of financial position and which is based on an estimate of bad debts, is an application of which of the following? a. Expense recognition principle. b. Consistency characteristic. c. Materiality quality. O d. Revenue recognition principle.

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