Required:

Prepare the appropriate journal entry to correct the cutoff error.

6) According to auditing standards, specific relevant aspects of an internal control system for making estimates include:

Management communication of the need for proper accounting estimates.

Accumulation of relevant, sufficient, and reliable data for estimates.

Preparation of estimates by qualified personnel.

Adequate review and approval by appropriate levels of authority.

Comparison of prior estimates with subsequent results to assess the reliability of the estimation outcomes.

Consideration by management of whether particular accounting estimates are consistent with the company's operational plans.

Required:

a. How would the auditor test these control activities over the production of estimates?

b. What substantive audit procedures would the auditor use to test the accounting estimates?