Page 236 - CA Inter Audit PARAM

CA Ravi Taori
SA 540 explains Management Bias
SA 540 addresses possible management bias in making accounting estimates. Indicators of possible
management bias do not constitute misstatements for purposes of drawing conclusions on the reasonableness
of individual accounting estimates. They may, however, affect the auditor’s evaluation of whether the financial
statements as a whole are free from material misstatement.

QNO Specific Evaluations
Old Course--(N18E/ S20M/S21M/M21M/N21M/M22R/M23M)
700.19 Bhaskar CNO - SA700.140
An auditor is required to make specific evaluations while forming an opinion in an audit report.” State them.
Answer ➢ Specific Evaluations by the auditor:
In particular, the auditor shall evaluate whether:
The financial statements adequately disclose the Significant accounting policies selected and
applied;
The accounting Policies selected and applied are consistent with the applicable financial reporting
framework and are appropriate;
The accounting Estimates made by management are reasonable;
The information presented in the financial statements is Relevant, reliable, comparable, and
understandable;
The financial statements provide adequate Disclosures to enable the intended users to understand
the effect of material transactions and events on the information conveyed in the financial
statements; and
The Terminology used in the financial statements, including the title of each financial statement, is
appropriate.
AUTHORS NOTE:
Shortcut to remember above points:
Specific STEP evaluation by DR is good.

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