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Professional Review and

Training Center (PRTC)

Considering Accounting
Estimates, Related Parties,
Litigation and Claims,
Segment Information, and
Going Concern
(AT.2514)
Leomar R. Cabarles
Outline

• Audit of Accounting Estimates,


Including Fair Value Measurements and
Disclosures
• Related Parties
• Litigation and Claims
• Segment Information
• Going Concern
Accounting
Estimates
Accounting Estimates: Responsibility

MGT F/S Auditor

Prepare Evidence of
no material
misstatement
Accounting Estimates: Reasonableness

• Focus on assumptions:

 Significant

 Sensitive to variation

 Deviation from history

 Subjective

 Susceptible to bias
Audit Procedures

1. Understand process

2. Any:
a. Review the process
b. Develop own estimate,
including expert’s work
c. Review subsequent events
Related Parties
Related Parties: Responsibility

MGT F/S Auditor

Disclose Evidence of
no material
misstatement
Indication of Related Parties

• Loan at less than market

• Loans with no scheduled


repayment terms

• Sale of real estate at prices


significantly different from FV
Audit Procedures

• Read BOD minutes of


meetings

• Examine large, unusual


transactions

• Inspect SEC filings, conflict of


interest statements, pensions,
and identify officers
Litigation and
Claims
Provisions & Contingencies: Responsibility

MGT F/S Auditor

Account and Evidence of


disclose no material
misstatement
Audit Procedures

• Inquiry of management

• Obtain database

• Inspect documents and


correspondence

• Send letters to client's lawyers

• Request written representations


Segment
Information
Segment Information: Responsibility

MGT F/S Auditor

Disclose Evidence of
no material
misstatement
Audit Procedures

• Understand management’s
methods

• Where appropriate, test


management’s methods

• Perform analytical procedures


or other procedures
Going Concern
Going Concern: Responsibility

MGT F/S Auditor

Assess Evidence of
appropriateness no material
misstatement
Separate
GC EOM
-now do the DIY drill-
DIY Drill Answers

1. D
2. B
3. D
4. C
5. C
DIY Drill Answers

6. A
7. B
8. B
9. C
10. B
DIY Drill Answers

11. C
12. B
 end of AT.2514 

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