Final answer:
An auditor's best estimate of misstatements before an audit is a hypothesis based on prior knowledge and experience. They apply strict criteria to all findings to ensure the audit's reliability and must avoid anchoring bias to maintain impartiality.
Step-by-step explanation:
The question refers to an auditor's best estimate of misstatements before carrying out audit procedures. This is indeed a correct statement. Prior to the initiation of detailed audit procedures, auditors may have a hypothesis about the potential misstatements they might uncover based on their understanding of the business and past experiences. However, facts and evidence gathered during the audit will determine the accuracy of these initial expectations. Auditors must apply strict criteria to both their expected and unexpected findings to ensure the reliability of their final report. This process requires careful attention to detail, adherence to auditing standards, and a commitment to professional skepticism to either confirm or adjust their initial estimates based on the evidence obtained.
Regarding the question's mention of a tendency to rely on initial values, this refers to the concept known as anchoring. Auditors need to be aware of this bias and ensure that their estimations are based on solid evidence rather than preconceived notions. It's paramount that auditors remain impartial and verify each measurement or observation against established audit criteria.