Question

Which of the following is a reason that accounts containing management estimates pose a high level of risk of material misstatement for auditors?a. Accounting estimates are especially susceptible to management bias.b. Accounting estimates are a means for management to manage or misstate the financial statements.c. Accounting estimates are sensitive to variations in management assumptions.d. All of the above are reasons that accounts containing management estimates pose a high level of risk of material misstatement for auditors

Answer 1

Answer: D

Explanation: All of the above are reasons that accounts containing management estimates pose a high level of risk of material misstatement for auditors.

This is as a result of the inclusion of past records or future foreseeable results into the financials being prepared and it entails subjective and objective factors as well as knowledge of current and past events.