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 