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Auditing 2 List the steps involved when the auditor reviews and tests the process used by...

Auditing 2

List the steps involved when the auditor reviews and tests the process used by management to estimate the bad and doubtful debts allowance.

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Answer #1

There are six steps involved in the procedure of reviewing and testing the process used by management in determining the allowance for bad debts by the auditor and they are as follows:

1. To ascertain the procedures of management for ascertain the estimate and also consider their reliability.

2. To ensure or ascertain that the procedures have been followed with proper attention and accuracy.

3. To identify the assumptions underlying the estimate and also consider their reasonableness.

4. To verify the reliability of the data which has been used for the purpose of estimation.

5. To check the calculations that are used to determine or estimate the general allowance.

6. To consider the reliability of previous year allowances

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