Within the retrospective review of estimates example and SAS 99, we have differentiated many common risks for audits. Please choose a topic from either of the aforementioned items, perform some research as to why your selected area tends to be more risky.

12:25 6 \".3: '13 '3' NI \"'?T+..ill 77%| ACCT4040: Retrospective Review of Significant Accounting Estimates Client Name: Example Client Balance Sheet Date: December 31, 2019 *Click arrows next to each header to expand/collapse that section. Instructions Auditing Standards further require auditors to perform a retrospective review of significant prior-year accounting estimates. The retrospective review includes reviewing information available in the current year and comparing that information to significant estimates recorded in the prior year. The intent of the review is not to question the auditor's judgment in the prior year, but to determine, with the benefit of hindsight, whether the underlying assumptions in the prior year might indicate possible bias on the part of management. The review may provide additional information about whether the current year's estimates could be biased. Significant estimates selected for retrospective testing should include those that are highly subjective or may change significantly based on the underlying assumptions and judgments. If auditors identify possible bias on the part of management in making accounting estimates, they should evaluate whether the bias indicates a risk of material misstatement clue to fraud, that is, intentional manipulation of the financial statements, and develop an appropriate response. Auditing standards require that the auditor should also consider whether differences between estimates best supported by the audit evidence, and the estimates included in the financial statements that are individually reasonable, indicate (in the aggregate) a possible bias on the part of management. If management, for example, always chooses estimated amounts for the valuation of assets that are at the low end of the auditor's range of acceptable amounts, the combined effect could result in a material misstatement of income. In that case, the auditor should consider whether other recorded estimates reflect a similar bias and perform additional procedures to address those estimates taken as a whole. The auditor should also consider whether management's estimates were clustered at one end of the auditor's range of acceptable amounts in the prior year and at the other end in the current year. That could indicate the possibility that management is using accounting estimates to manage earnings. If the auditor believes that is the case, he or she should consider communicating the matter to those charged with governance. III 0