Page 68 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
• Changes in accounting policies related to estimates
• Regulatory or external changes that may impact estimates and
• Any new conditions or events that may require new or revised estimates..
Special
3A. Identification of Unrecognized Estimates: During the audit, the auditor may identify transactions,
events, and conditions that require accounting estimates that were not identified by management.
3B. SA 315 and Unidentified Risks: SA 315 addresses situations where the auditor identifies risks of material
misstatement that management overlooked, including determining if there is a significant deficiency in
internal control regarding the entity's risk assessment processes.
How management makes the accounting estimates: (Computation)
(Shortcut: M ERU )
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Methods and Models: Management makes accounting estimates using specific methods and models.
Method Changes: Any changes in methods from previous periods and the reasons behind those changes for
making the accounting estimates.
Expert Consultation: Management may consult with experts during the estimation process.
Relevant Controls: There are relevant controls in place during the creation of accounting estimates.
Underlying Assumptions: The assumptions underlying the accounting estimates are considered.
Estimation Uncertainty Assessment: Management assesses the estimation uncertainty associated with the
estimates.

Review of Prior Period Estimates: The auditor reviews the outcome of accounting estimates in previous
financial statements, or any subsequent re-estimations, considering the nature of the estimates and the
relevance of the information for identifying and assessing the risks of significant misstatements in the current
financial statements. However, this review is not intended to question the judgments made in previous periods
based on the information available at that time.

Estimation Uncertainty: Accounting Estimates that give rise to Significant Risk
Significant Risk in Estimate: For accounting estimates that give rise to significant risks, in addition to other
substantive procedures performed to meet the requirements of SA 330, the auditor shall evaluate the following.
(Shortcut: MARD)
1. Reasonableness of Assumptions: The auditor determines if the significant assumptions used by
management are reasonable.
2. Alternative Assumptions: The auditor assesses whether management has considered alternative
assumptions or outcomes and the reasons for rejecting them.
3. Management's Intent and Ability: The auditor considers management's intent and ability to carry out
specific courses of action, if relevant to the reasonableness of the assumptions used or the application of the
financial reporting framework.

4.Develop Range Estimates: If the auditor believes that management has not adequately addressed the effects
of estimation uncertainty on the accounting estimates that pose significant risks, they may develop a range to
assess the reasonableness of the accounting estimate, if necessary.
Recognition and Measurement Criteria:
For accounting Estimates that give rise to significant risks, the auditor shall obtain sufficient appropriate audit
evidence whether the following are in accordance with the requirements of the applicable FRF
Recognition Decision: The auditor assesses management's decisions to include or exclude certain accounting
estimates in the financial statements.
Measurement Basis: The auditor evaluates the measurement basis chosen for these estimates.

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