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SAS
No. 22 Audit of Accounting Estimates |
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Issued by Auditing Standards Committee in Taiwan on
16 June, 1992. |
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Summary |
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The auditor should obtain sufficient appropriate audit evidence
regarding accounting estimates. Accounting estimate means an
approximation of the amount of an item in the absence of a precise
means of measurement. Management is responsible for making
accounting estimates included in financial statements. |
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The auditor should design and perform further audit procedures to
obtain sufficient appropriate audit evidence as to whether the
entity’s accounting estimates are reasonable in the circumstances
and, when required, appropriately disclosed. |
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The principal audit procedures for accounting estimates are:
(a) Evaluation of the data and consideration of assumptions on
which the estimate is based;
(b) Testing of the calculations involved in the estimate;
(c) Comparison, when possible, of estimates made for prior periods
with actual results of those periods; and
(d) Consideration of management’s approval procedures.
(e) Evaluation of results of audit procedures. |
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In evaluating the assumptions on which the estimate is based, the
auditor would consider, among other things, whether they are:
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Supported by sufficient and appropriate information.
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Reasonable in light of actual results in prior periods;
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Consistent with those used for other accounting estimates;
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Consistent with management’s plans which appear appropriate. |
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When possible, the auditor would compare accounting estimates made
for prior periods with actual results of those periods to assist in:
(a) Obtaining audit evidence about the general reliability of the
entity’s estimating procedures and methods, including relevant
control activities;
(b) Considering whether adjustments to estimating formulae may be
required; and
(c) Evaluating whether differences between actual results and
previous estimates have been quantified and that, where necessary,
appropriate adjustments or disclosures have been made. |
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Material accounting estimates are ordinarily reviewed and approved
by management. The auditor would consider whether such review and
approval is performed by the appropriate level of management and
that it is evidenced in the documentation supporting the
determination of the accounting estimate. |
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Transactions and events which occur after period end, but prior to
completion of the audit, may provide audit evidence regarding an
accounting estimate made by management. |
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The auditor should make a final assessment of the reasonableness of
the entity’s accounting estimates based on the auditor’s
understanding of the entity and its environment and whether the
estimates are consistent with other audit evidence obtained during
the audit. |
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 Effective
date
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This Statement is effective for audit of financial statements with
fiscal years ending on or after 31 December, 1992. |
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