NINJA Audit Smulation Research Number 9

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    Anonymous
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    NINJA Question –

    Am I missing some nuance in these research Question? Though the NINJA answer applies, 315.A141 is awfully close in wording.

    Question is: What section and paragraph of the AICPA’s Codification of Statements on Auditing Standards (clarified standards) state that the risk of material misstatement of the financial statements is generally greater when account balances and classes of transactions include accounting estimates rather than essentially factual data?

    Ninja Answer: AU-C 200.A42 states, “Inherent risk is higher for some assertions and related classes of transactions, account balances, and disclosures than for others. For example, it may be higher for complex calculations or for accounts consisting of amounts derived from accounting estimates that are subject to significant estimation uncertainty.”

    AU-C 315 .A141 A141

    Risks of material misstatement may be greater for matters that

    require significant judgment, such as the development of accounting estimates,

    arising from matters such as the following:

    Accounting principles for accounting estimates or revenue recog-

    nition may be subject to differing interpretation.

    Required judgment may be subjective or complex or it may re-

    quire assumptions about the effects of future events (for example,

    judgment about fair value)

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