Estimates, events, and going concern
Estimates, Going Concern, Related Parties
Test estimates for bias, evaluate management's going-concern plans, and disclose related parties.
How the exam words it
- -The stem evaluates an accounting estimate or compares a prior estimate to actual results.
- -Going concern doubt is present, and it asks about the report or the evaluation period.
- -Related party transactions raise an identification or disclosure question.
The playbook
- 1Evaluate the assumptions and data behind an estimate, and a prior estimate far off from actual signals possible management bias.
- 2Going concern doubt does not by itself modify the opinion, evaluate management's mitigation plans and the one-year-from-issuance period.
- 3For related parties, the auditor ensures proper identification and disclosure, not elimination or an arm's-length guarantee.
The trap
Assuming going concern doubt forces a qualified or adverse opinion. If disclosure is adequate, it is an unmodified opinion with a going-concern section.
How the exam varies it
The same pattern, re-skinned along these axes:
Estimate evaluation, going concern, or related partiesAdequate disclosure versus inadequateThe auditor's responsibility versus management's
Drill this pattern
8 questions of Estimates, Going Concern, Related Parties from across the AUD topics. Clear it by getting 5 right with a streak of 3.