Audit Case - RedPack Beer Company

1603 WordsJul 21, 20157 Pages
1. CAS 540 listed the following requirements related to auditing accounting estimates: When performing risk assessment procedures and related activities to obtain an understanding of the client and its environment, the auditor shall obtain an understanding of the following: The requirements of the applicable financial reporting framework relevant to accounting estimates, including related disclosures How management identifies those transactions, events and conditions that may give rise to the need for accounting estimates to be recognized or disclosed in the financial statements. And the auditor shall make inquiries of management regarding changes in circumstances that may give risk or new or the need to revise existing, accounting…show more content…
Whether the significant assumptions used by management are reasonable. Where relevant to the reasonableness of the significant assumptions used by management or the appropriate application of the applicable financial reporting framework, management's intent to carry out specific courses of action and its ability to do so. If, in the auditor's judgment, management has not adequately addressed the effects of estimation uncertainty on the accounting estimates that give rise to significant risks, the auditor shall, if considered necessary, develop a range with which to evaluate the reasonableness of the accounting estimate. Recognition and Measurement Criteria: the auditor shall obtain sufficient appropriate audit evidence about whether management's decision to recognize, or to not recognize, the accounting estimates in the financial statements; and the selected measurement basis for the accounting estimates, are in accordance with the requirements of the applicable financial reporting framework. Evaluating the Reasonableness of the Accounting Estimates, and Determining Misstatements: the auditor shall evaluate, based on the audit evidence, whether the accounting estimates in the financial statements are either

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