Question

Which of the following is not one of the primary approaches auditors use when evaluating the reasonableness of accounting estimates?

a) Review and test management's process of developing estimates
b) Confirm estimates directly with outsiders
c) Independently develop an estimate of the amount to compare to management's estimate
d) Review subsequent events or transactions bearing on the estimate

Answer 1

The answer is b) Confirm estimates directly with outsiders. Auditors use other approaches to evaluate the reasonableness of accounting estimates.

This correct answer is b)

Step-by-step explanation:

The answer is b) Confirm estimates directly with outsiders.

When evaluating the reasonableness of accounting estimates, auditors typically use three primary approaches:

1. Review and test management's process of developing estimates
2. Independently develop an estimate of the amount to compare to management's estimated
3. Review subsequent events or transactions bearing on the estimate

Confirming estimates directly with outsiders is not one of the primary approaches auditors use to evaluate the reasonableness of accounting estimates.

This correct answer is b)