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How can auditors gain assurance about fair value estimates in the investment cycle?

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 8RQSC

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How is the directional risk of investments applied in determining the appropriate audit procedures to be performed?
What are some of the typical areas of concern to auditors involving investment accounts?
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In performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? a. Are investment records periodically reconciled to actual listing of investments (i.e., per count or investment custodian statement)? b. Is there independent review of investments measured at fair value based on market valuation? c. Is investment income independently recalculated? d. All of the choices
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The amount of subjectivity involved in establishing fair value estimates can be complex for management responsible for making the fair value measurements and disclosures contained in financial statements. This is particularly true for fair value measurements for which observable market prices are not available. Auditing standards require auditors to obtain sufficient appropriate audit evidence to provide reasonable assurance that fair value measurements and disclosures are in conformity with accounting standards, and auditing standards provide guidance for auditing those measurements and disclosures contained in financial statements. a. Visit the PCAOB's web site (pcaobus.org) to identify where in the PCAOB Auditing Standards guidance is provided for auditing fair value measurements and disclosures. b. PCAOB auditing standards require the auditor to obtain an understanding of the entity's process for determining fair value measurements and disclosures. Identify 5 things the auditor…
WHAT ARE THE SIGNIFICANT RISK YOU SHOULD CONSIDER UPON AUDITING CURRENT LIABILITIES AND HOW WOULD IT AFFECT OUR COMBINED RISK ASSESSMENT AND PLANNED AUDIT PROCEDURES?
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In performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? A. Is there independent review of investments measured at fair value based on market valuation? B. Is investment income independently recalculated? C. All of the choices D. Are investment records periodically reconciled to actual listing of investments (example: per count ot investment custodian statement)?