L19 Notes_Part_16 - Are the effects material in other...

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Audit Adjustments SAS No. 57 What makes an adjustment important? Contentious? 1. Materiality 2. Subjectivity: GAAP restrictive, subjective v. objective issue 3. Client preferences, auditor incentives Will the adjustment get booked? Partner experience, personality and character SEC client Other issues: 1. Communicate waived audit adjustments to audit committee 2. Adequacy of disclosures, other info in annual report
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Audit Adjustments SAS No. 57 A. Materiality Summarize Possible Adjustments: Accumulate and segregate immaterial errors. Does the directional effect suggests a management bias? If the aggregate effect is material, they adjust or you qualify
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Unformatted text preview: Are the effects material in other periods? B. Subjectivity Valuation, measurement, estimates, allocations reflect the preparers uncertainty regarding future events. Subjectivity can lead to contention between auditor and client if the adjustment is not preferred by the client. Examples of estimates: A. Airline passenger reservations’ B. Warranty claims C. Allowance for doubtful accounts, loan loss reserves D. Obsolete inventory E. Depreciation and amortization F. Income tax and accrued property tax G. Pension costs H. Subscription income I. Percentage of completion J. Loss contingencies...
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L19 Notes_Part_16 - Are the effects material in other...

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