Question

All of the following are true with respect to the finance and investment cycle except:

(A). Regarding internal controls over estimates, management often mitigates risk by accumulating reliable data, using qualified personnel, performing periodic reviews, and analytical reviews.

(B). Regarding internal controls over the finance and investment cycle, auditors usually begin with observation and inquiries about who prepared estimates, the source of the underlying data, who reviews and approves estimates and accordingly rarely rely on substantive test of details.

(C.) The new PCAOB standard covering audits of estimates, and fair values, which is effective on or after December 15, 2020, was issued to, among other things, reduce overlapping and conflicting guidance within existing audit standards.

(D). One of the key changes to the new standard referred to in (C.), above, is that it addresses troublesome practice issues that relate to the use of pricing information and price service provided by management to third parties.

Answer 1

Ans:

All of the following are true with respect to the finance and investment cycle except that PCAOB standard covering audits of estimates, addresses troublesome practice issues that relate to the use of pricing information and price service provided by management to third parties. Auditor collect the information from third party and use the third party information for inpendent evaluation of data as well as the use of third party pricing information used by the management. The standard do not cover use of information provided by Management to third party.

So correct answer is option D.

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