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Auditing Thoughts

In: Business and Management

Submitted By calicem
Words 360
Pages 2
Extreme Estimation Uncertainty and Audit Assurance
This study provides evidence that the values reported in the financial statements are sensitive to very small changes in just one valuation input, which, in turn, suggests that reasonable estimation ranges can be many times greater than quantitative materiality. Therefore, auditors are required to provide reasonable assurance defined in auditing standards as “high” assurance, that the financial statements taken as a whole are fairly stated in all material respects.
This study also recommends that audit standards setters and regulators consider changes in the type of assurance provided for accounts with extreme estimation uncertainty and the form and content of the audit report. I agree with this because some estimates reported in public company financial statements contain extreme measurement uncertainty and this would outstrip the auditor’s ability to provide a high level of positive assurance that financial statements are fairly stated in all material respects.

The Financial Statement Insurance Alternative to Auditor Liability
In this article, I learnt about the basic structure of financial statement insurance (FSI). And FSI contributes two key advantages. First is auditors have greater power to pressure managers to apply accounting policies promoting more reliable financial statements; second is insurers gauge financial statement reliability and reflect this in the policy premium they charge a particular company for a particular level of coverage. Besides these two advantages, FSI also has some imperfections. First is auditors may be tempted to suppress discoveries made in later years covered by a previously-issued policy. Another is skimming, the risk of a race-to-the bottom among insurers to increase premium volume by offering lenient audits.
Michael J. Moody thought that proposed financial statement…...

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