Audit procedures for accounting estimates (ISA-540)
When the accounting estimate involved material misstatement in the financial statements, the auditor procedures includes-
01. The auditor should design and perform further audit procedures to obtain sufficient appropriate audit evidence, so as to entity’s accounting estimates are reasonable in the circumstances.
02. Review and test the process used by management to develop the estimate.
03. Review subsequent events which provide audit evidence of the reasonableness of estimates.
04. Evaluation of the data and consideration of assumptions on which the estimate is based.
05. Testing of the calculations involved in the accounting estimate.
06. Consideration of management’s approval procedures
07. Compare of previous estimate with the actual results.
In finally :-
By applying these audit procedures, auditors can obtain sufficient and appropriate audit evidence to form an opinion on the reasonableness of accounting estimates and enhance the overall reliability of the financial statements.