Estimates, Related Parties, Going Concern, and Subsequent Events

Section 3 is the heaviest part of the AUD exam (30-40%), and estimates, going concern, and subsequent events come up again and again because they rely heavily on auditor judgment. The snare is the going concern evaluation period. Under AU-C 570, the auditor checks for substantial doubt over a reasonable period, not to exceed one year beyond the date the financial statements are issued (or available to be issued), not one year from the balance sheet date. Candidates also misclassify subsequent events by focusing on when the event happened instead of when the underlying condition arose, which is the real test under AU-C 560. And under AU-C 540, management bias in estimates is a fraud risk factor the auditor must specifically evaluate.