Waste Management Case

Topics: Auditing, Internal control, Audit Pages: 4 (1110 words) Published: February 15, 2012
Fraud Triangle
Identifying fraud indicatives of each of three conditions: incentives, opportunities, and attitudes

Significant Management Estimation
Identifying balances based on significant management estimation techniques

Inherent Risk associated with Estimation
Accounts involving significant management estimation viewed as inherently risky

Auditor’s responsibilities for examining management-generated estimates AU Section 342
AU Section 342, Auditing Accounting Estimates, provides auditors guidance on gathering and evaluating sufficient appropriate audit evidence to support significant accounting estimates provided by the client on financial statements, in accordance with generally accepted auditing standards. It is management’s responsibility for making the accounting estimates included in the financial statement. These estimates, according to AU Section 342, are based on subjective as well as objective factors and, as a result, judgment is required to estimate an amount for the financial statements. As a result, it is the auditor’s responsibility to evaluate the reasonableness of these accounting estimates made by management in the context of the financial statements taken as a whole. Because there is a potential for bias in the subjective factors affecting these estimates that management presents, auditors are responsible for treating these estimates with an attitude of professional skepticism, for both the subjective and objective factors. It is the auditor’s responsibility to obtain the sufficient and appropriate evidence to provide reasonable assurance that all accounting estimates have been developed, are reasonable in the circumstances, and are presented in accordance with applicable accounting principles. In evaluating the reasonableness of an estimate, AU Section 342, encourages auditors to concentrate on key factors and assumptions that are: a.Significant to the accounting estimates.

b.Sensitive to variations.
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